What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2023-03-15 compared with 2022-03-15 · 520 added, 739 removed, 1186 unchanged (51% of the section changed)

51 unchanged sentences

Consolidated Statements of Shareholders’

Equity for the Years Ended December 31, 2021 and 2020

Equity and Temporary Equity for the Years Ended December 31, 2022 and 2021

Consolidated Statements of Cash Flows for the Years Ended December 31, 2022 and 2021

4 unchanged sentences

Unless Otherwise Indicated(1)

Articles of Incorporation, as amended

May 16, 2017, Form 8-K, exhibit 3.1

Articles of Amendment Establishing Cumulative Convertible Preferred Stock, Series A

December 30, 2019, Form 8-K, exhibit 3.1

Articles of Amendment Establishing the 7.625% Series B Cumulative Perpetual Preferred Stock

June 11, 2021, Form 8-K, exhibit 3.1

Amended and Restated Articles of Incorporation

November 8, 2022, Form 10-Q, exhibit 3.1

Articles of Amendment Establishing Cumulative Convertible Preferred Stock, Series A (included as Exhibit B to Exhibit 3.1 hereto)

November 8, 2022, Form 10-Q, exhibit 3.1

Amended and Restated Articles of Amendment Establishing the 7.625% Series B Cumulative Perpetual Preferred Stock (included as Exhibit C to Exhibit 3.1 hereto)

November 8, 2022, Form 10-Q, exhibit 3.1

Amended and Restated Bylaws (as amended through May 12, 2017)

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Description of Atlanticus Holdings Corporation's Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934

Filed herewith

March 15, 2022, Form 10-K, exhibit 4.1

Form of common stock certificate

40 unchanged sentences

May 14, 2021, Form 10-Q, exhibit 10.4

Outside Director Compensation Package 

Filed herewith

Outside Director Compensation Package

November 8, 2022, Form 10-Q, exhibit 10.1

Amended and Restated Note Purchase Agreement, dated March 1, 2010, among Merrill Lynch Mortgage Capital Inc., CCFC Corp.

7 unchanged sentences

Series 2017-One Indenture Supplement for Perimeter Master Note Business Trust, dated February 8, 2017

Filed herewith

March 15, 2022, Form 10-K, exhibit 10.11(a)

Amended and Restated Series 2017-One Indenture Supplement for Perimeter Master Note Business Trust, dated June 11, 2018

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Purchase Agreement, dated February 8, 2017, among TSO-Fortiva Notes Holdco LP, TSO-Fortiva Certificate Holdco LP, Perimeter Funding Corporation, Atlanticus Services Corporation and Perimeter Master Note Business Trust

Filed herewith

March 15, 2022, Form 10-K, exhibit 10.11(k)

First Amendment to Purchase Agreement, dated June 11, 2018, among TSO-Fortiva Notes Holdco LP, TSO-Fortiva Certificate Holdco LP, Perimeter Funding Corporation, Access Financing, LLC and Perimeter Master Note Business Trust

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FORM 10-K SUMMARY

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Atlanta, State of Georgia, on March 15, 2022.

Atlanticus Holdings Corporation

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President, Chief Executive Officer and Director (Principal Executive Officer)

March 15, 2022

March 14, 2023

/s/William R.

Chief Financial Officer (Principal Financial Officer)

March 15, 2022

March 14, 2023

/s/Mitchell C.

Chief Accounting Officer (Principal Accounting Officer)

March 15, 2022

March 14, 2023

Executive Chairman of the Board

March 15, 2022

March 14, 2023

Report of Independent Registered Public Accounting Firm

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Opinion on Internal Control over Financial Reporting

We have audited Atlanticus Holdings Corporation (the “Company’s”) internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control –

We have audited Atlanticus Holdings Corporation’s (the “Company’s”) internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control –

Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “COSO criteria”).

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We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated balance sheets of the Company as of December 31, 2022 and 2021, the related consolidated statements of income, shareholders’

equity, and cash flows for each of the two years in the period ended December 31, 2021, and the related notes and our report dated March 15, 2022 expressed an unqualified opinion thereon.

equity and temporary equity, and cash flows for each of the three years in the period ended December 31, 2022, and the related notes and our report dated March 14, 2023 expressed an unqualified opinion thereon.

Basis for Opinion

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We have audited the accompanying consolidated balance sheets of Atlanticus Holdings Corporation (the “Company”) as of December 31, 2022 and 2021, the related consolidated statements of income, shareholders’

equity, and cash flows for each of the two years in the period ended December 31, 2021, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2021 , in conformity with accounting principles generally accepted in the United States of America.

equity and temporary equity, and cash flows for each of the three years in the period ended December 31, 2022, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022 , in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company's internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control –

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Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Allowance for Uncollectible Loans, Interest and Fess Receivable, Gross

As described in Note 2 to the Company’s consolidated financial statements, the Company has outstanding loans of $375.7 million at gross amortized cost and a related allowance for uncollectible loans, interest and fees receivable, gross of $55.8 million at December 31, 2021 within its Credit as a Service (“CaaS”) Segment, which includes credit cards and other unsecured lending product classes of receivables. 

Management determines the necessary allowance for uncollectible loans, interest and fees receivable, gross by analyzing all of the following attributes:

historical loss rates;

current delinquency and roll-rate trends;

vintage analyses based on the number of months an account has been in existence;

effects of changes in the economy on consumers;

changes in underwriting criteria;

and estimated recoveries. 

Changes in these assumptions can have a material effect on the Company’s financial results.

We identified the significant judgmental assumptions by management in determining the adequacy of the allowance for uncollectible loans, interest and fees receivable, gross within the CaaS Segment to be a critical audit matter. 

The significant judgmental assumptions impacting the recorded allowance are the effects of changes in the economy on consumers and the changes in underwriting criteria. 

Auditing these complex judgments involved especially challenging auditor judgment due to the nature and extent of audit evidence and effort required to address these matters.

The primary procedures we performed to address this critical audit matter included:

Obtaining an understanding, assessing the design and testing the operating effectiveness of controls over the Company’s estimate of the allowance for uncollectible loans, interest and fees receivable, gross within the CaaS Segment, including controls over management’s review of the significant assumptions and the completeness and accuracy of data used to develop the changes in the economy on consumers and the changes in underwriting criteria.

Evaluating the judgmental assumptions used by management by comparing to historical results, current economic data, and changes to underwriting criteria to determine if such assumptions were relevant, reliable, and reasonable for the purpose used.

Testing the relevance and reliability of the data used in determining the judgmental assumptions by testing the completeness and accuracy of data used including internal and external third-party sources.

Evaluating any evidence (e.g., external economic data, peer data, internal company data) that is contradictory to the conclusions reached by management in establishing the judgmental assumptions supporting the allowance for uncollectible loans, interest and fees receivable, gross within the CaaS Segment.

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relate(s) to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matter(s) does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.

Loans, Interest and Fees Receivable, at Fair Value.

As described in Note 2 and Note 6 to the Company’s consolidated financial statements, the Company has outstanding loans interest and fees receivable, fair value of $1,026.4 million within the CaaS Segment at December 31, 2021. 

The loans, interest and fees receivable, fair value are associated with the Company’s private label credit and general purpose credit card platform that were acquired on or after January 1, 2020. 

The Company estimates the fair value of these receivables using a discounted cash flow model and reevaluates their fair value at the end of each quarter. 

The discounted cash flow model assumptions used to determine the performance expectation include timing of expected cash flows and discount rates. 

As described in Note 2 and Note 6 to the Company’s consolidated financial statements, the Company has outstanding loans, interest, and fees receivable, at fair value of $1,818 million at December 31, 2022.

As of January 1, 2022 all receivables associated with the Company’s private label credit and general purpose credit cards are included within loans, interest, and fees receivable, at fair value.

The Company estimates the fair value of these receivables using a discounted cash flow model and reevaluates their fair value at the end of each quarter.

The discounted cash flow model assumptions used to determine the performance expectation include timing of expected cash flows and discount rates.

The impact of changes in the fair value of loans, interest, and fees receivable, at fair value is reflected within the period incurred and can have a material impact on the financial results of the Company.

We identified the significant assumptions used by management in the discounted cash flow model used to estimate the fair value to be a critical audit matter. 

The significant assumptions impacting the fair value calculation are timing of expected cash flows and discount rates. 

Auditing these complex assumptions involved especially challenging auditor judgment due to the nature and extent of audit evidence and effort required to address these matters including the extent of specialized skill or knowledge needed.

The primary procedures we performed to address this critical audit matter included:

Obtaining an understanding, assessing the design and testing the operating effectiveness of controls over the Company’s estimate of the fair value of loans, interest and fees receivable within the CaaS Segment, including controls over management’s review of the significant assumptions and the completeness and accuracy of data used to develop the fair value calculation and timing of cash flows and reasonableness of the discount rate.

We identified the significant assumptions used by the Company in the discounted cash flow model used to estimate the fair value of outstanding loans, interest, and fees receivable, at fair value to be a critical audit matter.

The significant assumptions impacting the fair value calculation include the timing of expected cash flows and discount rates applied.

Auditing these significant assumptions involved especially challenging auditor judgment due to the nature and extent of audit evidence and effort required to address these matters including the involvement of individuals with specialized skill and knowledge.

The primary procedures we performed to address this critical audit matter included: 

Obtaining an understanding, assessing the design and testing the operating effectiveness of controls over the Company’s estimate of the fair value of loans, interest and fees receivable, including controls over management’s review of the significant assumptions and the completeness and accuracy of data used to develop the fair value calculation.

Testing the relevance and reliability of data related to the assumptions by agreeing data to internal and external third-party sources.

Evaluating the assumptions used for the timing of expected cash flows by comparing to historical performance to determine if such assumptions were relevant, reliable, and reasonable for the purpose used, including consideration of evidence (e.g., external economic data and peer data) that may be contradictory to the conclusions reached by management.

Evaluating the discount rates used by comparing to market-based discount rates to determine if such assumption were relevant, reliable, and reasonable for the purpose used, including consideration of evidence (e.g., external economic data, peer data, internal company data) that may be contradictory to the conclusion reached by management.

Involving professionals with specialized skills and knowledge to evaluate the reasonableness of the timing of cash flows and discount rate assumptions used by management to determine the fair value.

Involving professionals with specialized skills and knowledge in valuation to assist in the evaluation of the reasonableness of discount rates assumptions used by management to determine the fair value by comparing to market-based discount rates to determine if such assumptions were relevant, reliable, and reasonable for the purpose used, including consideration of evidence (e.g., external economic data, peer data, internal company data) that may be contradictory to the conclusion reached by management.

/s/ BDO USA, LLP

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1,026,424  

Loans, interest and fees receivable, gross (including $ 369.6 million and $ 560.2 million associated with variable interest entities at December 31, 2021 and December 31, 2020, respectively)

Loans, interest and fees receivable, gross (including $ 0 and $ 369.6 million associated with variable interest entities at December 31, 2022 and December 31, 2021, respectively)

105,267  

470,293  

Allowances for uncollectible loans, interest and fees receivable (including $ 55.1 million and $ 120.9 million associated with variable interest entities at December 31, 2021 and December 31, 2020, respectively)

Allowances for uncollectible loans, interest and fees receivable (including $ 0 and $ 55.1 million associated with variable interest entities at December 31, 2022 and December 31, 2021, respectively)

( 1,643 )  

Deferred revenue (including $ 8.2 million and $ 10.3 million associated with variable interest entities at December 31, 2021 and December 31, 2020, respectively)

Deferred revenue (including $ 0 and $ 8.2 million associated with variable interest entities at December 31, 2022 and December 31, 2021, respectively)

( 16,190 )  

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Property at cost, net of depreciation

Investments in equity-method investee

10,013  

Operating lease right-of-use assets

11,782  

Prepaid expenses and other assets

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1,278,864  

Notes payable associated with structured financings, at fair value (associated with variable interest entities)

Convertible senior notes

24,386  

Senior notes, net

144,385  

142,951  

Income tax liability

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Shareholders' Equity

Series B preferred stock, no par value, 3,188,533 shares issued and outstanding at December 31, 2021 and 0 shares issued and outstanding at December 31, 2020 (liquidation preference - $ 79.7 million) (1)

Series B preferred stock, no par value, 3,204,640 shares issued and outstanding at December 31, 2022 (liquidation preference - $ 80.1 million);

3,188,533 shares issued and outstanding at December 31, 2021 (1)

Common stock, no par value, 150,000,000 shares authorized:

14,804,408 and 16,115,353 shares issued at December 31, 2021 and December 31, 2020, respectively;

14,804,408 and 16,115,353 (including 1,459,233 loaned shares to be returned at December 31, 2020) shares outstanding at December 31, 2021 and December 31, 2020, respectively

14,453,415 and 14,804,408 shares issued and outstanding at December 31, 2022 and December 31, 2021, respectively

Paid-in capital

1 unchanged sentence

227,763  

Retained earnings (deficit )

Retained earnings

204,415  

60,236  

Total shareholders’

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Consumer loans, including past due fees

$ 518,783  

$ 410,616  

Fees and related income on earning assets

194,466  

133,960  

Other revenue

30,606  

15,431  

Total operating revenue, net

743,855  

560,007  

Other non-operating revenue

Total revenue

748,056  

563,410  

Interest expense

( 54,127 )  

Provision for losses on loans, interest and fees receivable recorded at net realizable value

( 36,455 )  

Provision for losses on loans, interest and fees receivable recorded at amortized cost

Changes in fair value of loans, interest and fees receivable and notes payable associated with structured financings recorded at fair value

( 218,733 )  

438,741  

260,595  

Operating expense:

Salaries and benefits

34,024  

29,079  

Card and loan servicing

75,397  

63,047  

Marketing and solicitation

56,635  

35,012  

22,180  

17,819  

Total operating expense

189,729  

146,204  

Loss on repurchase and redemption of convertible senior notes

29,439  

Income before income taxes

219,573  

114,391  

Income tax expense

( 41,784 )  

177,789  

93,917  

Net loss attributable to noncontrolling interests

Net income attributable to controlling interests

177,902  

94,120  

Preferred dividends and discount accretion

( 22,363 )  

Net income attributable to common shareholders

$ 155,539  

$ 77,050  

Net income attributable to common shareholders per common share—basic

$ 10.32  

$ 5.32  

Net income attributable to common shareholders per common share—diluted

$ 7.56  

$ 3.95  

See accompanying notes.

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Consolidated Statements of Shareholders’

Equity and Temporary Equity

For the Years Ended December 31, 2022 and 2021

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Balance at December 31, 2019

15,885,314  

$ 212,692  

$ ( 211,786 )  

$ ( 571 )  

$ 49,050  

$ 40,000  

Accretion of discount associated with issuance of subsidiary equity

( 300 )  

Preferred dividends

( 16,770 )  

Stock option exercises and proceeds related thereto

407,533  

Compensatory stock issuances, net of forfeitures

68,040  

Contributions by preferred shareholders

50,000  

Deferred stock-based compensation costs

Stock-based compensation costs

Redemption and retirement of shares

( 245,534 )  

( 3,353 )  

Net income (loss)

94,120  

( 203 )  

93,917  

Balance at December 31, 2020

16,115,353  

$ 194,950  

$ ( 117,666 )  

$ ( 774 )  

$ 76,510  

$ 99,350  

$ 40,000  

Accretion of discount associated with issuance of subsidiary equity

( 300 )  

Preferred dividends

( 22,063 )  

Stock option exercises and proceeds related thereto

526,015  

Compensatory stock issuances, net of forfeitures

56,654  

Issuance of series B preferred stock, net

3,188,533  

75,270  

Contributions by owners of noncontrolling interests

Deferred stock-based compensation costs

Stock-based compensation costs

Redemption and retirement of shares

( 1,893,614 )  

( 25,219 )  

177,902  

( 113 )  

177,789  

Net income (loss)

Balance at December 31, 2021

3,188,533  

14,804,408  

$ 227,763  

$ 60,236  

$ ( 500 )  

$ 287,499  

$ 99,650  

$ 40,000  

See accompanying notes.

Series B Preferred Stock

Temporary Equity

Shares Issued

Paid-In Capital

Retained Earnings (Deficit)

Noncontrolling Interests

Class B Preferred Units

Series A Preferred Stock

Balance at December 31, 2021

Cumulative effects from adoption of the CECL standard

Accretion of discount associated with issuance of subsidiary equity

Discount associated with repurchase of preferred stock

Preferred dividends

Stock option exercises and proceeds related thereto

Compensatory stock issuances, net of forfeitures

Issuance of series B preferred stock, net

Contributions by owners of noncontrolling interests

Stock-based compensation costs

Redemption and retirement of preferred shares

Redemption and retirement of common shares

Net income (loss)

Balance at December 31, 2022

See accompanying notes.

Atlanticus Holdings Corporation and Subsidiaries

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Loss on repurchase and redemption of convertible senior notes

Deferred stock-based compensation costs

Stock-based compensation costs

Lease liability payments

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Increase in income tax liability

Increase (decrease) in accounts payable and accrued expenses

Increase in accounts payable and accrued expenses

Net cash provided by operating activities

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Effect of exchange rate changes on cash

Net increase in cash and cash equivalents and restricted cash

Net (decrease) increase in cash and cash equivalents and restricted cash

Cash and cash equivalents and restricted cash at beginning of period

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typically refer to receivables we have purchased from our bank partners or from third parties.

Within our Credit as a Service ("CaaS") segment, we apply our technology solutions, in combination with the experiences gained, and infrastructure built from servicing over $27  billion in consumer loans over our 25 -year operating history, to support lenders in offering more inclusive financial services.

Within our Credit as a Service (“CaaS”) segment, we apply our technology solutions, in combination with the experiences gained, and infrastructure built from servicing over $30 billion in consumer loans over more than 25  years of operating history, to support lenders in offering more inclusive financial services.

These products include private label credit and general purpose credit cards originated by lenders through multiple channels, including retailers and healthcare providers, direct mail solicitation, digital marketing and partnerships with third parties.

The services of our bank partners are often extended to consumers who may not have access to financing options with larger financial institutions.

We specialize in supporting this “second-look”

credit service.

Our flexible technology solutions allow our bank partners to integrate our paperless process and instant decisioning platform with the existing infrastructure of participating retailers and service providers.

The services of our bank partners are often extended to consumers who may not have access to financing options with larger financial institutions.

Our flexible technology solutions allow our bank partners to integrate our paperless process and instant decisioning platform with the existing infrastructure of participating retailers, healthcare providers and other service providers.

Using our technology and proprietary predictive analytics, lenders can make instant credit decisions utilizing hundreds of inputs from multiple sources and thereby offer credit to consumers overlooked by many providers of financing who focus exclusively on consumers with higher FICO scores.

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These include investments in companies engaged in mobile technologies, marketplace lending and other financial technologies.

These investments are carried at cost.

None of these companies are publicly-traded and there are no material pending liquidity events.

None of these companies are publicly-traded and the carrying value of our investment in these companies is not material.

Within our Auto Finance segment, our CAR subsidiary operations principally purchase and/or service loans secured by automobiles from or for, and also provide floor plan financing for, a pre-qualified network of independent automotive dealers and automotive finance companies in the buy-here, pay-here, used car business.

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In March 2020, a national emergency was declared under the National Emergencies Act due to a new strain of coronavirus ("COVID- 19" ).

In March 2021, the American Rescue Plan, a $1.9 trillion stimulus package that extended and expanded benefits provided under previous legislation, was signed into law.

The long-term impacts of the new law on the economy and our consumers is currently unknown.

The duration and severity of the effects of COVID- 19 on our financial condition, results of operations and liquidity remain highly uncertain.

The COVID- 19 pandemic has negatively impacted global supply chains and business operations.

In addition, rising inflation in 2021 and 2022 resulted in increased costs for many goods and services.

As a result of persistently high inflation, interest rates have been on the rise and are expected to continue rising in the near term.

The combination of rising inoculation rates in the U.S.

population and the federal COVID- 19 relief package contributed to increased economic recovery in 2021;

however, fiscal support of businesses and individuals has declined.

Russia’s invasion of Ukraine has intensified supply chain disruptions and heightened uncertainty surrounding the near-term outlook for the broader economy.

The impacts of new COVID- 19 variants, responses to the COVID- 19 pandemic by both consumers and governments, rising energy costs, inflation, rising interest rates, and the unresolved geopolitical tensions relating to Russia’s invasion of Ukraine could significantly affect the economic outlook.

The duration and severity of the effects of COVID- 19 on our financial condition, results of operations and liquidity remain uncertain.

Likewise, we do not know the duration and severity of the impact of COVID- 19 on all members of the Company’s ecosystem –

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as well as our employees.

We continue to monitor the ongoing pandemic and have modified certain business practices including minimizing employee travel and transitioning to a hybrid remote work model.

These practices have also been adopted by certain of our third party service partners.

We continue to monitor the ongoing pandemic, have modified certain business practices, including offering consumers greater payment flexibility.

These and similar practices have also been adopted by certain of our third party service partners.

Significant Accounting Policies and Consolidated Financial Statement Components

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Certain estimates, such as credit losses, payment rates, costs of funds, discount rates and the yields earned on credit card receivables, significantly affect the reported amount (and changes thereon) of our Loans, interest and fees receivables, at fair value and Notes payable associated with structured financings recorded at fair value on our consolidated balance sheets and consolidated statements of income.

Additionally, estimates of credit losses have a significant effect on loans, interest and fees receivable, net, as shown on our consolidated balance sheets, as well as on the provision for losses on loans, interest and fees receivable within our consolidated statements of income. 

We have eliminated all significant intercompany balances and transactions for financial reporting purposes.

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We maintain unrestricted cash and cash equivalents for general operating purposes and to meet our longer term debt obligations.

The majority of these cash balances are not insured.

We maintain our cash and cash equivalents in accounts at regulated domestic financial institutions in amounts that exceed FDIC insured amounts of approximately $4.5 million based on our current banking relationships.  

Restricted Cash

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For both categories of loans, interest and fees receivable, other than our Auto Finance receivables, interest and fees are discontinued when loans, interest and fees receivable become contractually 90 or more days past due.

We charge off our CaaS and Auto Finance segment receivables when they become contractually more than 180 days past due.

We charge off our CaaS receivables, against our Changes in fair value of loans, interest and fees receivable and notes payable associated with structured financings recorded at fair value, when they become contractually more than 180 days past due. 

We charge off our Auto Finance segment receivables, against our Allowance for uncollectible loans, interest and fees receivable, when they become contractually more than 180 days past due.

For all of our receivables portfolios, we charge off receivables within 30 days of notification and confirmation of a customer’s bankruptcy or death.

However, in some cases of death, we do not charge off receivables if there is a surviving, contractually liable individual or estate large enough to pay the debt in full.

We adopted Accounting Standards Update ("ASU") 2016 - 13, Measurement of Credit Losses on Financial Instruments on January 1, 2022.

This ASU requires the use of an impairment model (the current expected credit loss (“CECL”) model) that is based on expected rather than incurred losses.

The ASU also allows for a one -time fair value election for receivables.

Upon adoption, we elected the fair value option for all remaining loans receivable associated with our private label credit and general purpose credit card platform previously measured at amortized cost and recorded an increase to our Allowances for uncollectible loans, interest and fees receivable for our remaining Loans, interest and fees receivable associated with our Auto Finance segment.

The adoption of CECL resulted in an increase to our opening balance of retained earnings of $ 8.6 million.

Loans, Interest and Fees Receivable, at Fair Value.

Loans, interest and fees receivable held at fair value represent both the receivables underlying credit card securitization trusts (the "Securitized Receivables") and those receivables for which we elected the fair value option on January 1, 2020 ( the "Fair Value Receivables").

Both the Securitized Receivables and the Fair Value Receivables are held by entities that qualify as variable interest entities ("VIE"), and are consolidated onto our consolidated balance sheets, some portfolios of which are unencumbered and some of which are still encumbered under structured or other financing facilities.

Loans, interest and fees receivable held at fair value represent receivables for which we have elected the fair value option (the "Fair Value Receivables").

The Fair Value Receivables are held by entities that qualify as variable interest entities ("VIE"), and are consolidated onto our consolidated balance sheets, some portfolios of which are unencumbered and some of which are still encumbered under structured or other financing facilities.

Loans and finance receivables include accrued and unpaid interest and fees.

Under the fair value option for both our Securitized Receivables and our Fair Value Receivables, direct loan origination fees (such as annual and merchant fees) are taken into income when billed to the consumer or upon loan acquisition and direct loan origination costs are expensed in the period incurred.

As discussed above, as of January 1, 2022 all receivables associated with our private label credit and general purpose credit cards are included within this category of receivables.

Under the fair value option, direct loan origination fees (such as annual and merchant fees) are taken into income when billed to the consumer or upon loan acquisition and direct loan origination costs are expensed in the period incurred.

The Company estimates the fair value of the loans using a discounted cash flow model, which considers various unobservable inputs such as remaining cumulative charge-offs, remaining cumulative prepayments, average life and discount rate.

The Company re-evaluates the fair value of loans receivable at the close of each measurement period.

Changes in the fair value of loans, interest and fees receivable are recorded as a component of "Changes in fair value of loans, interest and fees receivable and notes payable associated with structured financings recorded at fair value" in the consolidated statements of income in the period of the fair value changes.

Changes in the fair value of loans, interest and fees receivable recorded at fair value include the impact of current period charge offs associated with these receivables. 

Changes in the fair value of loans, interest and fees receivable are recorded as a component of "Changes in fair value of loans, interest and fees receivable and notes payable associated with structured financings recorded at fair value" in the consolidated statements of income in the period of the fair value changes.

Changes in the fair value of loans, interest and fees receivable recorded at fair value include the impact of current period charge-offs associated with these receivables.

Further details concerning our loans, interest and fees receivable held at fair value are presented within Note 6, “Fair Values of Assets and Liabilities.”

Loans, Interest and Fees Receivable, Gross.

Our loans, interest and fees receivable, gross, currently consist of receivables associated with (a) a portion (those which are not part of our Fair Value Receivables) of our private label credit and general purpose credit card receivables within our CaaS segment and (b) our Auto Finance segment’s operations.

Our loans, interest and fees receivable, gross, currently consist of receivables associated with our Auto Finance segment’s operations.

Prior to January 1, 2022 this category of receivable also included a portion (those which were not part of our Fair Value Receivables) of our private label credit and general purpose credit card receivables within our CaaS segment.

Our CaaS segment loans, interest and fees receivable generally are unsecured, while our Auto Finance segment loans, interest and fees receivable generally are secured by the underlying automobiles for which we hold the vehicle title.

We purchased auto loans with outstanding principal of $ 194.8 million and $ 185.0 million for the years ended December 31, 2021 

and 2020, respectively, through our pre-qualified network of independent automotive dealers and automotive finance companies.

We purchased auto loans with outstanding principal of $ 214.7 million and $ 194.8 million for the years ended December 31, 2022 and 2021, respectively, through our pre-qualified network of independent automotive dealers and automotive finance companies.

We show both an allowance for uncollectible loans, interest and fees receivable and unearned fees (or “deferred revenue”) for our loans, interest and fees receivable that are not carried at fair value.

The allowance is an estimate of the probable losses inherent within loans, interest and fees receivable that the Company does not report at fair value.

Our loans, interest and fees receivable consist of smaller-balance, homogeneous loans, divided into two portfolio segments:

CaaS and Auto Finance.

While each of these categories has unique features, they share many of the same credit risk characteristics and thus share a similar approach to the establishment of an allowance for loan losses.

Each portfolio segment is divided into pools based on common characteristics such as contract or acquisition channel.

Upon adoption of CECL, the allowance is an estimate of the expected losses (rather than incurred losses) inherent within loans, interest and fees receivable that the Company does not report at fair value.

Our loans, interest and fees receivable consist of smaller-balance, homogeneous loans.

While each of these categories has unique features, they share many of the same credit risk characteristics and thus share a similar approach to the establishment of an allowance for credit losses.

Each portfolio is divided into pools based on common characteristics such as contract or acquisition channel.

For each pool, we determine the necessary allowance for uncollectible loans, interest and fees receivable by analyzing some or all of the following unique attributes for each type of receivable pool:

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and estimated recoveries.

For our Auto Finance segment we may further reduce the expected charge-off, taking into consideration specific dealer level reserves which may allow us to offset our losses and, in the case of secured loans, the impact of collateral available to offset a potential loss.

Conversely, for receivables in our CaaS segment, which generally do not have a secured interest in collateral, we look to reserve for the gross expected exposure to charge-offs.

These reserves are considered in conjunction with (and potentially reduced by) any unearned fees and discounts that may be applicable for an outstanding loan receivable.

We may further reduce the expected charge-off, taking into consideration specific dealer level reserves which may allow us to offset our losses and, in the case of secured loans, the impact of collateral available to offset a potential loss.

A considerable amount of judgment is required to assess the ultimate amount of uncollectible loans, interest and fees receivable, and we continuously evaluate and update our methodologies to determine the most appropriate allowance necessary.

We may individually evaluate a receivable or pool of receivables for impairment if circumstances indicate that the receivable or pool of receivables may be at higher risk for non-performance than other receivables (e.g., if a particular retail or auto-finance partner has indications of non-performance (such as a bankruptcy) that could impact the underlying pool of receivables we purchased from the partner).

Certain of our loans, interest and fees receivable also contain components of deferred revenue including merchant fees on the purchases of receivables for our private label credit receivables and annual fee billings for our general purpose credit card receivables.

Our private label credit and auto finance loans, interest and fees receivable include principal balances and associated fees and interest due from customers which are earned each period a loan is outstanding, net of the unearned portion of merchant fees and loan discounts.

Additionally, many of our general purpose credit card receivables have an annual membership fee that is billed to the consumer on card activation and on each anniversary of that date thereafter.

As of December 31, 2021 

and December 31, 2020, the weighted average remaining accretion period for the $ 29.3 million and $ 39.5 million of deferred revenue reflected in the consolidated balance sheets was 15 months and 14 months, respectively.

Included within deferred revenue, are merchant fees and discounts on purchased loans of $ 20.4 million and $ 28.2 million as of December 31, 2021 

and December 31, 2020, respectively.

As a result of the COVID- 19 pandemic and subsequent declaration of a national emergency in March 2020 under the National Emergencies Act, certain consumers have been offered the ability to defer their payment without penalty during the national emergency period.

In March 2020, the federal bank regulatory agencies issued an “Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus” ("COVID- 19 Guidance").

We may individually evaluate a receivable or pool of receivables for impairment if circumstances indicate that the receivable or pool of receivables may be at higher risk for nonperformance than other receivables (e.g., if a particular retail or auto-finance partner has indications of non-performance (such as a bankruptcy) that could impact the underlying pool of receivables we purchased from the partner).

Certain of our loans, interest and fees receivable (including those receivables associated with our private label credit and general purpose credit card receivables prior to their adoption of fair value accounting) also contain components of deferred revenue including merchant fees on the purchases of receivables for our private label credit receivables, loan discounts on the purchase of our auto finance receivables and annual fee billings for our general purpose credit card receivables.

Our private label credit, general purpose credit card and auto finance loans, interest and fees receivable include principal balances and associated fees and interest due from customers which are earned each period a loan is outstanding, net of the unearned portion of merchant fees, annual fees and loan discounts.

As of December 31, 2022 and December 31, 2021, the weighted average remaining accretion period for the $ 16.2  million and $ 29.3 million of deferred revenue reflected in the consolidated balance sheets was 27 months and 15 months, respectively.

Included within deferred revenue, are discounts on purchased auto loans of $ 16.2  million as of December 31, 2022 and merchant fees and discounts of $ 20.4 million as of December 31, 2021.

As a result of the COVID- 19 pandemic and subsequent declaration of a national emergency in March 2020 under the National Emergencies Act and the associated government policy responses and corresponding inflation, certain consumers have been offered the ability to defer their payment without penalty during the national emergency period.

("COVID- 19 Guidance").

The COVID- 19 Guidance encourages financial institutions to work prudently with borrowers that may be unable to meet their contractual obligations because of the effects of COVID- 19.

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Receivables enrolled in these short-term payment deferrals continue to accrue interest and their delinquency status will not change through the deferment period.

Through December 31, 2021 we continued to actively work with consumers that indicated hardship as a result of COVID- 19;

 however, the number of impacted consumers continued to be a diminishing part of our overall receivable base.

In order to establish appropriate reserves for this population, we considered various factors such as subsequent payment behavior and additional requests by the consumer for further deferrals or hardship claims.  

Through December 31, 2022 we continued to actively work with consumers that indicated hardship as a result of COVID- 19 and inflation pressure;

however, the number of impacted consumers is a small part of our overall receivable base.

Our CaaS segment consists of two classes of receivable:

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$ ( 12.4 )  

Provision for loan losses

Cumulative effects from adoption of fair value under the CECL standard

Cumulative effects from adoption of the CECL standard

( 0.2 )  

Provision for credit losses

( 1.3 )  

Balance at end of period

$ ( 1.6 )  

As of December 31, 2022

Other Unsecured Lending Products

Allowance for uncollectible loans, interest and fees receivable:

Balance at end of period individually evaluated for impairment

Balance at end of period collectively evaluated for impairment

$ ( 1.6 )  

Loans, interest and fees receivable:

Loans, interest and fees receivable, gross

$ 105.3  

Loans, interest and fees receivable individually evaluated for impairment

Loans, interest and fees receivable collectively evaluated for impairment

$ 105.3  

For the Year Ended December 31, 2021

Other Unsecured Lending Products

Allowance for uncollectible loans, interest and fees receivable:

Balance at beginning of period

$ ( 88.2 )  

$ ( 1.7 )  

$ ( 35.1 )  

Provision for credit losses

( 34.9 )  

( 0.2 )  

( 1.4 )  

( 8.9 )  

( 1.0 )  

( 7.0 )  

Balance at end of period

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$ ( 63.4 )  

Provision for loan losses

Provision for credit losses

( 112.1 )  

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Amounts we believe we will not ultimately collect are included as a component in our overall allowance for uncollectible loans, interest and fees receivable. 

Recoveries, noted above, consist of amounts received from the efforts of third -party collectors we employ and through the sale of charged-off accounts to unrelated third -parties.

All proceeds received, associated with charged-off accounts, are credited to the allowance for uncollectible loans, interest and fees receivable and effectively offset our provision for losses on loans, interest and fees receivable recorded at net realizable value on our consolidated statements of income.

For the year ended December 31, 2020, $ 12.4  million of our recoveries noted above related to collections from third -party collectors we employ and $ 13.8 million related to sales of charged-off accounts to unrelated third -parties.

Recoveries, noted above, consist of amounts received from the efforts of third -party collectors and through the sale of charged-off accounts to unrelated third parties.

All proceeds received, associated with charged-off accounts, are credited to the allowance for uncollectible loans, interest and fees receivable and effectively offset our provision for losses on loans, interest and fees receivable recorded at amortized cost on our consolidated statements of income.

For the year ended December 31, 2022, $ 1.3 million of our recoveries noted above related to collections from third -party collectors and $ 0.0 million related to sales of charged-off accounts to unrelated third parties.

For the year ended December 31, 2021, $ 8.7 million of our recoveries noted above related to collections from third -party collectors we employ and $ 8.2  million related to sales of charged-off accounts to unrelated third parties. For the year ended December 31, 2020, $ 12.4 million of our recoveries noted above related to collections from third -party collectors we employ and $ 13.8 million related to sales of charged-off accounts to unrelated third parties.

We consider loan delinquencies a key indicator of credit quality because this measure provides the best ongoing estimate of how a particular class of receivables is performing.

An aging of our delinquent loans, interest and fees receivable, gross (in millions) by class of receivable as of 

December 31, 2021 and December 31, 2020  is as follows:

An aging of our delinquent loans, interest and fees receivable, gross (in millions) by class of receivable is as follows:

As of December 31, 2022

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30-59 days past due

60-89 days past due

90 or more days past due

Delinquent loans, interest and fees receivable, gross

Current loans, interest and fees receivable, gross

Total loans, interest and fees receivable, gross

$ 105.3  

Balance of loans greater than 90-days delinquent still accruing interest and fees

As of December 31, 2021

Other Unsecured Lending Products

30-59 days past due

$ 17.6  

60-89 days past due

90 or more days past due

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Troubled Debt Restructurings

As part of ongoing collection efforts, once an account, the receivable of which is included in our CaaS segment, becomes 90 days or more past due, the related receivable is placed on a non-accrual status.

Placement on a non-accrual status results in the use of programs under which the contractual interest associated with a receivable may be reduced or eliminated, or a certain amount of accrued fees is waived, provided a minimum number or amount of payments have been made.

Following this adjustment, if a customer demonstrates a willingness and ability to resume making monthly payments and meets certain additional criteria, we will re-age the customer’s account.

When we re-age an account, we adjust the status of the account to bring a delinquent account current, but generally do not make any further modifications to the payment terms or amount owed.

As part of ongoing collection efforts, once an account, the receivable of which is included in our CaaS segment, becomes 

90  days or more past due, the related receivable is placed on a non-accrual status.

Placement on a non-accrual status results in the use of programs under which the contractual interest associated with a receivable 

be reduced or eliminated, or a certain amount of accrued fees is waived, provided a minimum number or amount of payments have been made.

Following this adjustment, if a customer we serve demonstrates a willingness and ability to resume making monthly payments and meets certain additional criteria, the customer’s account is re-aged.

When an account is re-aged, the status of the account is adjusted to bring a delinquent account current, but generally 

no  further modifications to the payment terms or amounts owed are made.

Once an account is placed on a non-accrual status, it is closed for further purchases.

Accounts that are placed on a non-accrual status and thereafter make at least one payment qualify as troubled debt restructurings (“TDRs”).

The above referenced COVID- 19 Guidance issued by federal bank regulatory agencies, in consultation with the FASB staff, concluded that short-term modifications (e.g., six months) made on a good faith basis to borrowers who were impacted by COVID- 19 and who were less than 30 days past due as of the implementation date of a relief program are not TDRs.

Although we are not a financial institution and therefore not directly subject to the COVID- 19 Guidance, we believe this constitutes an interpretation of GAAP and therefore should be applied to our accounting circumstances.

Accounts that are placed on a non-accrual status and thereafter make at least 

one  payment qualify as troubled debt restructurings (“TDRs”).

The above referenced COVID- 19  Guidance issued by federal bank regulatory agencies, in consultation with the Financial Accounting Standards Board (“FASB”) staff, concluded that short-term modifications (e.g., 

six  months) made on a good faith basis to borrowers who were impacted by COVID- 19  and whose accounts were less than 

30  days past due as of the implementation date of a relief program are 

not  TDRs.

Although we are 

not  a financial institution and therefore 

not  directly subject to the COVID- 19  Guidance, we believe this constitutes an interpretation of GAAP and therefore should be applied to our accounting circumstances.

As a result, the below tables exclude certain accounts that are included under that guidance.

The following table details by class of receivable, the number and amount of modified loans, including TDRs that have been re-aged, as of December 31, 2021 and December 31, 2020 :

The following table details by class of receivable, the number and amount of modified loans, including TDRs that have been re-aged:

December 31, 2022

December 31, 2021

December 31, 2020

Private label credit

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General purpose credit card

Private label credit

General purpose credit card

Number of TDRs

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39,322  

12,394  

37,784  

Number of TDRs that have been re-aged

28,598  

Amount of TDRs on non-accrual status (in thousands)

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$ 25,154  

$ 14,537  

$ 26,989  

Amount of TDRs on non-accrual status above that have been re-aged (in thousands)

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$ 1,553  

$ 4,662  

$ 6,890  

Carrying value of TDRs (in thousands)

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$ 15,502  

$ 9,583  

$ 14,287  

TDRs - Performing (carrying value, in thousands)*

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$ 13,387  

$ 7,420  

$ 11,855  

TDRs - Nonperforming (carrying value, in thousands)*

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$ 2,115  

$ 2,163  

$ 2,432  

*“TDRs - Performing”

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include all accounts with past due amounts owed.

We do not separately reserve or impair these receivables outside of our general reserve process.

The Company modified 65,125  and 60,908 accounts, with a carrying amount of $ 70.0  million and $ 70.3 million during the twelve month periods ended December 31, 2021  and December 31, 2020 , respectively, that qualified as TDRs.

The following table details by class of receivable, the number of accounts and balance of loans that completed a modification (including those that were classified as TDRs) within the periods indicated and subsequently defaulted.

not  separately reserve or impair these receivables outside of our general reserve process.

The Company modified 

232,086 , 

65,125 and 60,908 accounts in the amount of $ 230.4 million, $ 70.0 million and $ 70.3 million during the 

twelve  month periods ended 

December 31, 2022, 2021 and 2020, respectively, that qualified as TDRs.

The following table details by class of receivable, the number of accounts and balance of loans that completed a modification (including those that were classified as TDRs) within the prior 

twelve  months and subsequently defaulted.

Twelve Months Ended

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December 31, 2021

December 31, 2020

Private label credit

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General purpose credit card

Private label credit

General purpose credit card

Number of accounts

28,714  

Loan balance at time of charge off (in thousands)

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$ 6,455  

$ 4,352  

$ 6,745  

Property at Cost, Net of Depreciation

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We incurred no impairment costs in 2022 and no  impairment costs in 2021 .

Investment in Equity-Method Investee

We account for an investment using the equity method of accounting if we have the ability to exercise significant influence, but not control, over the investee.

Significant influence is generally deemed to exist based on ownership interest, although other factors, such as representation on an investee’s board of managers, specific voting and veto rights held by each investor and the effects of commercial arrangements, are considered in determining whether equity method accounting is appropriate.

We record interests in the income of an equity-method investee within the equity in income of equity-method investee category on our consolidated statements of income.

We used the equity method for our 66.7 % investment in a limited liability company formed in 2004 to acquire a portfolio of credit card receivables.

Prior to the acquisition of the outstanding noncontrolling interest in September 2021 ( and subsequent consolidation), we accounted for this investment using the equity method of accounting due to specific voting and veto rights held by each investor, which did 

not allow us to control this investee. 

Prepaid Expenses and Other Assets

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Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses reflect both the billed and unbilled amounts owed at the end of a period for services rendered.

Commencing in July 2019, accounts payable and accrued expenses includes payments owed under a deferred payment program started with an unrelated third -party for a portion of our marketing expenditures.

As a result of this agreement, we were able to extend the payment terms associated with our growing marketing spend between 10 - 37 months.

Accounts payable and accrued expenses reflect both the billed and unbilled amounts owed at the end of a period for services rendered. 

Revenue Recognition and Revenue from Contracts with Customers

Consumer Loans, Including Past Due Fees

Consumer loans, including past due fees reflect interest income, including finance charges, and late fees on loans in accordance with the terms of the related customer agreements.

Premiums, discounts and merchant fees paid or received associated with installment or auto loans that are not included as part of our Fair Value Receivables are deferred and amortized over the average life of the related loans using the effective interest method.

Premiums, discounts and merchant fees paid or received associated with Fair Value Receivables are recognized upon receivable acquisition.

Finance charges and fees, net of amounts that we consider

uncollectible, are included in loans, interest and fees receivable and revenue when the fees are earned based upon the contractual terms of the loans.

Consumer loans, including past due fees reflect interest income, including finance charges, and late fees on loans in accordance with the terms of the related customer agreements.

Discounts received associated with auto loans that are not included as part of our Fair Value Receivables are deferred and amortized over the average life of the related loans using the effective interest method.

Premiums, discounts, annual fees and merchant fees paid or received associated with Fair Value Receivables are recognized upon receivable acquisition.

Finance charges and fees, net of amounts that we consider uncollectible, are included in loans, interest and fees receivable and revenue when the fees are earned based upon the contractual terms of the loans.

Fees and Related Income on Earning Assets

Fees and related income on earning assets primarily include fees associated with the credit products, including the receivables underlying our private label credit and general purpose credit card platform, and our legacy credit card receivables which include the recognition of annual fee billings and cash advance fees among others.

We assess fees on credit card accounts underlying our credit card receivables according to the terms of the related cardholder agreements and, except for annual membership fees, we recognize these fees as income when they are charged to the customers’

We accrete annual membership fees associated with our credit card receivables into income on a straight-line basis over the cardholder privilege period which is generally 12 months for our amortized cost receivables, and when billed for those receivables that are included as part of our Fair Value Receivables.

Similarly, fees on our other credit products are recognized when earned, which coincides with the time they are charged to the customers' accounts.

Fees and related income on earning assets primarily include fees associated with credit products, including the receivables underlying the private label and general purpose credit cards we service, and our legacy credit card receivables which include the recognition of annual fee billings and cash advance fees among others.

Fees are assessed on credit card accounts underlying our credit card receivables according to the terms of the related cardholder agreements and we recognize these fees as income when they are charged to the customers’

Fees and related income on earning assets, net of amounts that we consider uncollectible, are included in loans, interest and fees receivable and revenue when the fees are earned based upon the contractual terms of the loans.

The election of the fair value option to account for certain loans receivable that were acquired on or after January 1, 2020, resulted in increased fees recognized on credit products throughout the periods presented.

The election of the fair value option to account for certain loans receivable resulted in increased fees recognized on credit products throughout the periods presented.

Other revenue

Other revenue includes revenues associated with interchange revenues, servicing income and ancillary product offerings (primarily associated with a credit protection program offered by our lending partner). We recognize these fees as income in the period earned.

Other revenue includes revenues associated with interchange revenues, servicing income and ancillary product offerings (primarily associated with a credit protection program offered by our issuing bank partner). We recognize these fees as income in the period earned.

Other non-operating revenue

Other non-operating revenue includes revenues associated with investments in equity method investees and other revenues not associated with our ongoing business operations.

During the year ended December 31, 2020, we received $ 2.0 million in distributions from an investment in a consumer finance technology company. We retained our minority ownership stake in this company and will continue to carry the investment on our books at cost minus impairment, if any, plus or minus changes resulting from observable price changes.

Revenue from Contracts with Customers

The majority of our revenue is earned from financial instruments and is not included within the scope of ASU No.

The majority of our revenue is earned from financial instruments and is not included within the scope of ASU No.

2014 - 09, "Revenue from Contracts with Customers".

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Interchange fees are earned when our customer's cards are used over established card networks.

We earn a portion of the interchange fee the card networks charge merchants for the transaction.

We earn a portion of the interchange fee the card networks charge merchants for the transaction.

Servicing revenue is generated by meeting contractual performance obligations related to the collection of amounts due on receivables, and is settled with the customer net of our fee.

Service charges and other customer related fees are earned from customers based on the occurrence of specific services. 

None of these revenue streams result in an ongoing obligation beyond what has already been rendered. Revenue from these contracts with customers is included as a component of Other revenue on our consolidated statements of income.

Service charges and other customer related fees are earned from customers based on the occurrence of specific services.

None of these revenue streams result in an ongoing obligation beyond what has already been rendered.

Revenue from these contracts with customers is included as a component of Other revenue on our consolidated statements of income.

Components (in thousands) of our revenue from contracts with customers is as follows:

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Service charges and other customer related fees

13,658  

13,725  

Total revenue from contracts with customers

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$ 42,798  

1 ) Interchange revenue is presented net of customer reward expense.

For the Year Ended December 31, 2021

Interchange revenues, net (1)

$ 18,134  

Servicing income

Service charges and other customer related fees

Total revenue from contracts with customers

$ 29,322  

$ 1,284  

$ 30,606  

1 ) Interchange revenue is presented net of customer reward expense.

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In periods where we repurchased or redeemed outstanding 5.875 % convertible senior notes (“convertible senior notes”), we recorded any discount or premium paid for the repurchase or redemption (including accrued interest) relative to the amortized book value of the notes.

For the year ended December 31, 2021, we repurchased or redeemed $ 33.8 million in face amount of our outstanding convertible senior notes for $ 54.3 million in cash (including accrued interest).

For the year ended December 31, 2021, we repurchased or redeemed $ 33.8 million in face amount of our convertible senior notes for $ 54.3 million in cash (including accrued interest).

The repurchase and redemption resulted in an aggregate loss of approximately $ 29.4 million (including the convertible senior notes’

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Upon acquisition, the notes were retired.

See Note 11,"Convertible Senior Notes" for more information.

Recent Accounting Pronouncements

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The election can be made on an instrument by instrument basis.

ASU 2016 - 13 (and ASU 2019 - 05 ) was initially effective for annual and interim periods beginning after December 15, 2019, with early adoption permitted.

The FASB delayed the effective date of this standard until annual and interim periods beginning after December 15, 2022 for filers that qualified as smaller reporting companies at the time of the delay, with early adoption permitted.

We plan to adopt ASU 2016 - 13 beginning January 1, 2022, 

using the modified retrospective method of adoption. We plan to elect the fair value option for all receivables in our CaaS segment currently measured at amortized cost.

For all other receivables we will record an increase to our allowance for loan losses using the current expected credit loss model. As a result of our adoption, we expect an increase to our Loans, interest and fees receivable (net of the related revaluation), at fair value of approximately $ 315 million (with a corresponding decrease to Loans, interest and fees receivable, gross of approximately $ 375  million), a decrease to our Allowances for uncollectible loans, interest and fees receivable of approximately $ 55 million, a decrease to our Deferred revenue of approximately $ 15  million, a decrease to Accounts payable and accrued expenses of approximately $ 600  thousand, an increase to our deferred tax liability of approximately $ 2  million, and an increase to our retained earnings of approximately $ 8  million. These amounts are subject to change as we finalize our adoption efforts.

The aforementioned impacts associated with our planned adoption of ASU 2016 - 13 primarily relate to those assets within our CaaS segment with an immaterial impact to our Auto Finance segment receivables.

We adopted ASU 2016 - 13 beginning January 1, 2022, using the modified retrospective method of adoption.

We elected the fair value option for all receivables in our CaaS segment previously measured at amortized cost.

For all other receivables, we recorded an increase to our Allowances for uncollectible loans, interest and fees receivable using the current expected credit loss model.

As a result of our adoption, we increased our Loans, interest and fees receivable (net of the related revaluation), at fair value by $ 315.0 million (with a corresponding decrease to Loans, interest and fees receivable, gross of $ 375.7 million), a decrease to our Allowances for uncollectible loans, interest and fees receivable of $ 55.6 million, a decrease to our Deferred revenue of $ 15.6 million, a decrease to Accounts payable and accrued expenses of $ 600 thousand, an increase to our deferred tax liability of $ 2.5 million, and an increase to our retained earnings of $ 8.6 million.

The aforementioned impacts associated with our adoption of ASU 2016 - 13 primarily relate to those assets within our CaaS segment with an immaterial impact to our Auto Finance segment receivables.

In March 2020, the FASB issued ASU No.

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Scope, which refines the scope of ASC 848 and clarifies some of its guidance as part of the FASB’s monitoring of global reference rate reform.

Based on our preliminary analysis, LIBOR impacts us in limited circumstances primarily related to our existing debt agreements. 

We have not yet adopted this ASU and are evaluating the effect of adopting this new accounting guidance.

Subsequent Events

We evaluate subsequent events that occur after our consolidated balance sheet date but before our consolidated financial statements are issued. There are two types of subsequent events: ( 1 ) recognized, or those that provide additional evidence with respect to conditions that existed at the date of the balance sheet, including the estimates inherent in the process of preparing financial statements;

and ( 2 ) nonrecognized, or those that provide evidence with respect to conditions that did not exist at the date of the balance sheet but arose subsequent to that date. 

We have evaluated subsequent events occurring after December 31, 2021 , and based on our evaluation we did not identify any recognized or nonrecognized subsequent events that would have required further adjustments to our consolidated financial statements other than the developments described below.

In February 2022, 

options to purchase our common stock were exercised resulting in an increase to our common shares outstanding of 526,864  (net, after common stock withheld to satisfy the exercise price and tax withholding). These shares were previously included in our diluted share counts.

We purchased 451,407 shares of common stock through March 8, 2022, which were subsequently retired.

Based on our preliminary analysis, the London Interbank Offered Rate ("LIBOR") impacts us in limited circumstances primarily related to our existing debt agreements and will not have a material impact upon adoption. 

On March 31, 2022, the FASB issued ASU 2022 - 02, Financial Instruments - Credit Losses (Topic 326 ):

Troubled Debt Restructurings and Vintage Disclosures.

The ASU eliminates the accounting guidance for troubled debt restructurings by creditors while adding disclosures for certain loan restructurings by creditors when a borrower is experiencing financial difficulty.

This guidance requires an entity to determine whether a modification results in a new loan or a continuation of an existing loan.

Additionally, the ASU requires disclosure of current period gross writeoffs by year of origination for financing receivables.

The ASU is effective for the Company for fiscal years beginning after December 15, 2022.

The disclosures required by this ASU are required for receivables held at amortized cost. 

As the significant majority of the Company's receivables are held at fair value, the Company does not believe the adoption of this ASU will have a material impact on its financial results or accompanying disclosures.

Segment Reporting

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Our two reportable segments are: CaaS and Auto Finance.

As of both December 31, 2021 and December 31, 2020 , we did not have a material amount of long-lived assets located outside of the U.S., and only a negligible portion of our revenues for the years ended December 31, 2021 and 2020 were generated outside of the U.S.

As of both December 31, 2022 and December 31, 2021 , we did not have a material amount of long-lived assets located outside of the U.S.

We measure the profitability of our reportable segments based on their income after allocation of specific costs and corporate overhead;

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Consumer loans, including past due fees

$ 485,241  

$ 33,542  

$ 518,783  

Fees and related income on earning assets

194,392  

194,466  

Other revenue

29,322  

30,606  

Other non-operating revenue

Total revenue

713,090  

34,966  

748,056  

Interest expense

( 53,093 )  

( 1,034 )  

Provision for losses on loans, interest and fees receivable recorded at net realizable value

( 36,262 )  

( 193 )  

Provision for losses on loans, interest and fees receivable recorded at amortized cost

Changes in fair value of loans, interest and fees receivable and notes payable associated with structured financings recorded at fair value

( 218,733 )  

$ 405,002  

$ 33,739  

$ 438,741  

Income before income taxes

$ 208,926  

$ 10,647  

$ 219,573  

Income tax expense

$ ( 39,221 )  

$ ( 2,563 )  

$ 1,859,950  

$ 83,913  

$ 1,943,863  

Year Ended December 31, 2021

Consumer loans, including past due fees

$ 378,817  

$ 31,799  

$ 410,616  

Fees and related income on earning assets

133,891  

133,960  

Other revenue

14,372  

15,431  

Other non-operating revenue

Total revenue

530,440  

32,970  

563,410  

Interest expense

( 50,387 )  

( 1,161 )  

Provision for losses on loans, interest and fees receivable recorded at net realizable value

( 140,683 )  

( 2,036 )  

Provision for losses on loans, interest and fees receivable recorded at amortized cost

Changes in fair value of loans, interest and fees receivable and notes payable associated with structured financings recorded at fair value

( 108,548 )  

$ 230,822  

$ 29,773  

$ 260,595  

Income before income taxes

$ 105,429  

$ 8,962  

$ 114,391  

Income tax expense

$ ( 18,257 )  

$ ( 2,217 )  

$ 1,124,618  

$ 82,596  

$ 1,207,214  

Year Ended December 31, 2020

Consumer loans, including past due fees

Fees and related income on earning assets

Other revenue

Other non-operating revenue

Total revenue

Interest expense

Provision for losses on loans, interest and fees receivable recorded at amortized cost

Changes in fair value of loans, interest and fees receivable and notes payable associated with structured financings recorded at fair value

Income before income taxes

Income tax expense

Shareholders’

Equity and Preferred Stock

During the years ended December 31, 2022, 2021 and 2020, we repurchased and contemporaneously retired 1,674,161 shares, 

434,381 shares and 245,534 shares of our common stock at an aggregate cost of $ 88,939,000 , $ 25,219,000 and $ 3,353,000 , respectively, pursuant to both open market and private purchases and the return of stock by holders of equity incentive awards to pay tax withholding obligations.

During 2021,  we had 

1,459,233  loaned shares of common stock outstanding, which were originally lent in connection with our 

November 2005 

issuance of convertible senior notes.

December 31, 2021 ,  all loaned shares had been returned to us and subsequently retired.

In June and July 2021, we issued an aggregate of 3,188,533 shares of 7.625 % Series B Cumulative Perpetual Preferred Stock, liquidation preference of $ 25.00 per share (the “Series B Preferred Stock”), for net proceeds of approximately $ 76.5 million after deducting underwriting discounts and commissions, but before deducting expenses and the structuring fee.

We pay cumulative cash dividends on the Series B Preferred Stock, when and as declared by our Board of Directors, in the amount of $ 1.90625 per share each year, which is equivalent to 7.625% of the $ 25.00 liquidation preference per share.

During the year ending December 31, 

2022, we sold 19,607 shares of our Series B Preferred Stock under our “at-the-market”

offering program (the “ATM Program”) for net proceeds of $ 0.4  million.

During the year ended December 31, 2022, we repurchased and contemporaneously retired 3,500 shares of Series B Preferred Stock at an aggregate cost of $ 69,000 .

For further information regarding the ATM Program, see Note 15  “ATM Program.”

Redeemable Preferred Stock

On November 26, 2014, we and certain of our subsidiaries entered into a Loan and Security Agreement with Dove Ventures, LLC, a Nevada limited liability company (“Dove”).

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On December 27, 2019, the Company issued 400,000 shares of its Series A Preferred Stock with an aggregate initial liquidation preference of $ 40.0 million, in exchange for full satisfaction of the $ 40.0 million that the Company owed Dove under the Loan and Security Agreement.

Dividends on the preferred stock are 6 % per annum (cumulative, non-compounding) and are payable as declared, and in preference to any common stock dividends, in cash.

Dividends on the preferred stock are 6 % per annum (cumulative, noncompounding) and are payable as declared, and in preference to any common stock dividends, in cash.

The Series A Preferred Stock is perpetual and has no maturity date.

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Hanna, III and members of his immediate family are the beneficiaries of these other two trusts.

During the years ended December 30, 2021 and 2020, we repurchased and contemporaneously retired 434,381  and 245,534 shares of our common stock at an aggregate cost of $ 25,219,000 and $ 3,353,000 , respectively, pursuant to both open market and private purchases and the return of stock by holders of equity incentive awards to pay tax withholding obligations.

We had 1,459,233 loaned shares outstanding at December 31, 2020, which were originally lent in connection with our November 2005 issuance of convertible senior notes.

As of December 31, 2021, all loaned shares had been returned to us and subsequently retired.

On November 14, 2019, a wholly-owned subsidiary issued 50.5 million Class B preferred units at a purchase price of $ 1.00 per unit to an unrelated third party.

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The units have both call and put rights and are also subject to various covenants including a minimum book value, which if not satisfied, could allow for the securities to be put back to the subsidiary.

In March 2020, the subsidiary issued an additional 50.0 million Class B preferred units under the

A holder of the Class B Preferred Units may, at its election, require the Company to redeem part or all of such holder’s Class B Preferred Units for cash on October 14, 2024.

In March 2020, the subsidiary issued an additional 50.0 million Class B preferred units under the same terms.

The proceeds from the transaction are being used for general corporate purposes.

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for more information.

In June 2021, we issued an aggregate of 2.8 million shares of 7.625 % Series B Cumulative Perpetual Preferred Stock, no par value with a liquidation preference of $ 25.00 per share (the “Series B Cumulative Perpetual Preferred Stock”), in a public offering at a price to the public of $ 25.00 per share.

The Company also granted the Underwriters an option to purchase additional shares of Series B Cumulative Perpetual Preferred Stock during the 30 days following the date of the Underwriting Agreement.

The Company raised gross proceeds of $ 70.0 million before deducting underwriting discounts, the structuring fee and other offering expenses.

In July 2021, the Company issued an additional 388,533 shares of the Company's Series B Cumulative Perpetual Preferred Stock, pursuant to the exercise of the underwriters’

option to purchase additional shares.

Upon the closing of the second issuance, the Company raised additional gross proceeds of $ 9.7 million before deducting underwriting discounts, the structuring fee and other offering expenses.

The Series B Cumulative Perpetual Preferred Stock may be redeemed at our election (after 5 years) in whole or from time to time in part, by paying $ 25.00 per share, plus any accumulated and unpaid dividends.

Dividends on the Series B Cumulative Perpetual Preferred Stock will be payable quarterly and are deducted from Net income attributable to controlling interests to derive Net income attributable to common shareholders.

Investment in Equity-Method Investee

Our equity-method investment outstanding at December 31, 2020 consisted of our 66.7 % interest in a joint venture formed to purchase a credit card receivable portfolio.

In September 2021, we acquired the outstanding noncontrolling interest. 

In the following tables, we summarize (in thousands) balance sheet and results of operations data for our former equity-method investee:

December 31, 2021

December 31, 2020  

Loans, interest and fees receivables, at fair value

$ 1,994  

$ 2,105  

Total liabilities

Members’

$ 2,095  

Year ended December 31,

Net income attributable to investee

Fair Values of Assets and Liabilities

As previously discussed, as of January 1, 2020, we elected the fair value option to account for certain loans receivable associated with our private label credit and general purpose credit card platform that were acquired on or after January 1, 2020.

As previously discussed, we adopted ASU 2016 - 13, electing the fair value option for all remaining loans receivable associated with our private label credit and general purpose credit card platform previously measured at amortized cost.

We estimate the fair value of these receivables using a discounted cash flow model, and reevaluate the fair value of our Fair Value Receivables at the end of each quarter.

Additionally, we may adjust our models to reflect macro economic events.

With the aforementioned market impacts of COVID- 19 and related economic impacts, we included expected market degradation in our model to reflect the possibility of delinquency rates increasing in the near term (and the corresponding increase in chargeoffs and decrease in payments) above the level that historical trends would suggest.

We previously elected the fair value option with respect to our credit card loans, interest and fees receivable portfolios, the retained interests in which we historically recorded at fair value under securitization structures that were off balance sheet prior to accounting rules changes requiring their consolidation into our financial statements.

Fair value differs from amortized cost accounting in various ways.

Under the fair value option credit losses are recognized through income as they are incurred rather than through the establishment of an allowance and provision for losses.

Additionally, we may adjust our models to reflect macroeconomic events.

With the aforementioned market impacts of COVID- 19 and related economic impacts, we continue to include market degradation in our models to reflect the possibility of delinquency rates increasing in the near term (and the corresponding increase in charge-offs and decrease in payments) above the level that historical and current trends would suggest.

We update our fair value analysis each quarter, with changes since the prior reporting period reflected as a component of "Changes in fair value of loans, interest and fees receivable and notes payable associated with structured financings recorded at fair value" in the consolidated statements of income.

Changes in interest rates, credit spreads, realized and projected credit losses and cash flow timing will lead to changes in the fair value of loans, interest and fees receivable and notes payable associated with structured financings recorded at fair value and therefore impact earnings.

Changes in interest rates, credit spreads, discount rates, realized and projected credit losses and cash flow timing will lead to changes in the fair value of loans, interest and fees receivable and notes payable associated with structured financings recorded at fair value and therefore impact earnings.

Fair value differs from amortized cost accounting in the following ways:

Receivables and notes are recorded at their fair value, not their principal and fee balance or cost basis;

The fair value of the loans takes into consideration net charge-offs for the remaining life of the loans with no separate allowance for loan loss calculation;

The fair value of the loans takes into consideration net charge-offs for the remaining life of the loans with no separate allowance for credit loss calculation;

Certain fee billings (such as annual or merchant fees) and expenses of loans and notes are no longer deferred but recognized (when billed or incurred) in income or expense, respectively;

Changes in the fair value of loans and notes impact recorded revenues;

Net charge-offs are recognized as they occur.

For all of our other receivables and debt (other than the notes payable underlying our formerly off-balance sheet credit card securitization structures), we have not elected the fair value option.

Nevertheless, pursuant to applicable requirements, we include disclosures of the fair value of these other items to the extent practicable within the disclosures below.

The net present value of cash flows associated with future fee billings on existing receivables are included in fair value;

Changes in the fair value of loans and notes impact net margins;

Net charge-offs are recognized as they occur rather than through the establishment of an allowance and provision for losses for those loans, interest and fees receivable carried at amortized cost.

For all of our other receivables, we have not elected the fair value option.

Nevertheless, pursuant to applicable requirements, we include disclosures of the fair value of these other receivables to the extent practicable within the disclosures below.

Additionally, we have other liabilities, associated with consolidated legacy credit card securitization trusts, that we are required to carry at fair value in our consolidated financial statements, and they also are addressed within the disclosures below.

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Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.

The table below summarizes (in thousands) by fair value hierarchy the 

December 31, 2021 and December 31, 2020 fair values and carrying amounts of ( 1 ) our assets that are required to be carried at fair value in our consolidated financial statements and ( 2 ) our assets not carried at fair value, but for which fair value disclosures are required:

The table below summarizes (in thousands) by fair value hierarchy the December 31, 2022 and December 31, 2021 fair values and carrying amounts of ( 1 ) our assets that are required to be carried at fair value in our consolidated financial statements and ( 2 ) our assets not carried at fair value, but for which fair value disclosures are required:

Assets –

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Carrying Amount of Assets

Loans, interest and fees receivable, net for which it is practicable to estimate fair value

$ 402,380  

$ 383,811  

Loans, interest and fees receivable, net for which it is practicable to estimate fair value and which are carried at net amortized cost

Loans, interest and fees receivable, at fair value

$ 1,026,424  

Assets –

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Carrying Amount of Assets

Loans, interest and fees receivable, net for which it is practicable to estimate fair value

$ 586,908  

$ 503,139  

Loans, interest and fees receivable, net for which it is practicable to estimate fair value and which are carried at net amortized cost

Loans, interest and fees receivable, at fair value

$ 417,098  

For cash, deposits and investments in equity securities, the carrying amount is a reasonable estimate of fair value.

For those asset classes above that are required to be carried at fair value in our consolidated financial statements, gains and losses associated with fair value changes are detailed on our consolidated statements of income as a component of "Changes in fair value of loans, interest and fees receivable and notes payable associated with structured financings recorded at fair value".

For our loans, interest and fees receivable included in the above tables, we assess the fair value of these assets based on our estimate of future cash flows net of servicing costs, and to the extent that such cash flow estimates change from period to period, any such changes are considered to be attributable to changes in instrument-specific credit risk.

For those asset classes above that are required to be carried at fair value in our consolidated financial statements, gains and losses associated with fair value changes are detailed on our consolidated statements of income as a component of "Changes in fair value of loans, interest and fees receivable and notes payable associated with structured financings recorded at fair value".

For our loans, interest and fees receivable included in the above table, we assess the fair value of these assets based on our estimate of future cash flows net of servicing costs, and to the extent that such cash flow estimates change from period to period, any such changes are considered to be attributable to changes in instrument-specific credit risk.

For Level 3 assets carried at fair value measured on a recurring basis using significant unobservable inputs, the following table presents (in thousands) a reconciliation of the beginning and ending balances for the years ended December 31, 2022 , 2021 and 2020 :

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Balance at January 1,

$ 417,098  

$ 4,386  

Cumulative effects from adoption of fair value under the CECL standard

Net revaluations of loans, interest and fees receivable, at fair value, included in earnings

( 110,283 )  

Principal chargeoffs, net of recoveries, included in earnings

( 78,463 )  

Finance chargeoffs, included in earnings

( 30,794 )  

1,626,062  

713,579  

( 1,163,503 )  

Principal charge-offs, net of recoveries, included in earnings

Finance and fees, included in earnings

366,307  

103,983  

Finance charge-offs, included in earnings

Balance at December 31,

$ 1,026,424  

$ 417,098  

The unrealized gains and losses for assets within the Level 3 category presented in the tables above include changes in fair value that are attributable to both observable and unobservable inputs. 

Net Revaluation of Loans, Interest and Fees Receivable.

We record the net revaluation of loans, interest and fees receivable (including those pledged as collateral) in the Changes in fair value of loans, interest and fees receivable and notes payable associated with structured financings recorded at fair value category in our consolidated statements of income.

We record the net revaluation of loans, interest and fees receivable (including those pledged as collateral) in the Changes in fair value of loans, interest and fees receivable and notes payable associated with structured financings recorded at fair value category in our consolidated statements of income.

The net revaluation of loans, interest and fees receivable is based on the present value of future cash flows using a valuation model of expected cash flows and the estimated cost to service and collect those cash flows.

We estimate the present value of these future cash flows using a

valuation model consisting of internally-developed estimates of assumptions third -party market participants would use in determining fair value, including estimates of net collected yield, principal payment rates, expected principal credit loss rates, costs of funds, discount rates and servicing costs.

We estimate the present value of these future cash flows using internally-developed estimates of assumptions third -party market participants would use in determining fair value, including estimates of net collected yield, principal payment rates, expected principal credit loss rates, costs of funds, discount rates and servicing costs.

Interest income on receivables underlying our asset classes that are carried at fair value in our consolidated financial statements is recorded in Revenue - Consumer loans, including past due fees in our consolidated statements of income.

For Level 3 assets carried at fair value measured on a recurring basis using significant unobservable inputs, the following table presents (in thousands) quantitative information about the valuation techniques and the inputs used in the fair value measurement as of December 31, 2021 and December 31, 2020 :

December 31, 2022, 2021 and 2020.

As discussed above, our fair value models include market degradation to reflect the possibility of delinquency rates increasing in the near term (and the corresponding increase in charge-offs and decrease in payments) above the level that historical and current trends would suggest.

This market degradation is included in the below quantitative information: 

Quantitative Information about Level 3 Fair Value Measurement

Fair Value Measurement

Fair Value at December 31, 2021 (in thousands)  

Fair Value at December 31, 2022 (in thousands)

Valuation Technique

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Loans, interest and fees receivable, at fair value

$ 1,026,424  

Discounted cash flows

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Loans, interest and fees receivable, at fair value

$ 417,098  

Discounted cash flows

Gross yield, net of finance charge charge-offs

22.7% to 56.5% (43.3%)  

3.9% to 11.4% (8.5%)  

27.8% to 46.9% (40.9%)

5.4% to 12.9% (10.6%)

Expected principal credit loss rate

6.9% to 31.4% (24.8%)  

7.8% to 26.4% (23.5%)

Servicing rate

2.9% to 14.2% (4.3%)  

3.4% to 5.7% (4.6%)

Discount rate

12.8% to 13.5% (13.3%)  

12.3% to 13.5% (12.9%)

Quantitative Information about Level 3 Fair Value Measurement

Fair Value Measurement

Fair Value at December 31, 2020 (in thousands)

Valuation Technique

Unobservable Input

Range (Weighted Average)

Loans, interest and fees receivable, at fair value

Discounted cash flows

Gross yield, net of finance charge charge-offs

22.7% to 56.5% (43.3%)

3.9% to 11.4% (8.5%)

Expected principal credit loss rate

6.9% to 31.4% (24.8%)

Servicing rate

2.9% to 14.2% (4.3%)

Discount rate

12.8% to 13.5% (13.3%)

Valuations and Techniques for Liabilities

Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the liability.

The table below summarizes (in thousands) by fair value hierarchy the December 31, 2021 and December 31, 2020 fair values and carrying amounts of ( 1 ) our liabilities that are required to be carried at fair value in our consolidated financial statements and ( 2 ) our liabilities not carried at fair value, but for which fair value disclosures are required:

Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the liability.

The table below summarizes (in thousands) by fair value hierarchy the December 31, 2022 and 2021 fair values and carrying amounts of ( 1 ) our liabilities that are required to be carried at fair value in our consolidated financial statements and ( 2 ) our liabilities not carried at fair value, but for which fair value disclosures are required:

Liabilities –

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Revolving credit facilities

$ 1,255,518  

Amortizing debt facilities

$ 23,346  

Senior notes, net

$ 153,000  

$ 142,951  

Liabilities –

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Revolving credit facilities

$ 857,068  

Amortizing debt facilities

$ 25,542  

Convertible senior notes

$ 41,284  

$ 24,386  

Liabilities carried at fair value

Notes payable associated with structured financings, at fair value

$ 2,919  

For our notes payable where market prices are not available, we assess the fair value of these liabilities based on our estimate of future cash flows generated from their underlying credit card receivables collateral, net of servicing compensation required under the note facilities, and to the extent that such cash flow estimates change from period to period, any such changes are considered to be attributable to changes in instrument-specific credit risk.

Senior notes, net

For our notes payable where market prices are not available, we assess the fair value of these liabilities based on our estimate of future cash flows generated from their underlying credit card receivables collateral, net of servicing compensation required under the note facilities, and to the extent that such cash flow estimates change from period to period, any such changes are considered to be attributable to changes in instrument-specific credit risk.

Gains and losses associated with fair value changes for our notes payable associated with structured financing liabilities that are carried at fair value are detailed on our consolidated statements of income as a component of "Changes in fair value of loans, interest and fees receivable and notes payable associated with structured financings recorded at fair value".

For our convertible senior notes, we assess fair value based upon the most recent trade data available from third -party providers.

We have evaluated the fair value of our third party debt by analyzing the expected repayment terms and credit spreads included in our recent financing arrangements obtained with similar terms.

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for further discussion on our other notes payable.

For our material Level 3 liabilities carried at fair value measured on a recurring basis using significant unobservable inputs, the following table presents (in thousands) a reconciliation of the beginning and ending balances for the years ended December 31, 2021 and 2020 :

Notes Payable Associated with Structured Financings, at Fair Value  

Balance at January 1,

$ 2,919  

$ 3,920  

Net revaluations of notes payable associated with structured financings, at fair value, included in earnings

( 807 )  

Repayments on outstanding notes payable, net

( 2,112 )  

Balance at December 31,

$ 2,919  

The unrealized gains and losses for liabilities within the Level 3 category presented in the table above include changes in fair value that are attributable to both observable and unobservable inputs.

The unrealized gains and losses for liabilities within the Level 3 category presented in the table above include changes in fair value that are attributable to both observable and unobservable inputs.

We provide below a brief description of the valuation techniques used for Level 3 liabilities.

Net Revaluation of Notes Payable Associated with Structured Financings, at Fair Value.

We record the net revaluations of notes payable associated with structured financings, at fair value, in the Changes in fair value of loans, interest and fees receivable and notes payable associated with structured financings recorded at fair value on our consolidated statements of income.

We record the net revaluations of notes payable associated with structured financings, at fair value, in the Changes in fair value of loans, interest and fees receivable and notes payable associated with structured financings recorded at fair value on our consolidated statements of income.

The legal entity associated with the securitization transaction is consolidated as a VIE as the Company is deemed the primary beneficiary of the entity.

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The net revaluation of these notes is based on the present value of future cash flows utilized in repayment of the outstanding principal and interest under the facilities using a valuation model of expected cash flows net of the contractual service expenses within the facilities.

We estimate the present value of these future cash flows using a valuation model consisting of internally-developed estimates of assumptions third -party market participants would use in determining fair value, including:

We estimate the present value of these future cash flows using internally-developed estimates of assumptions third -party market participants would use in determining fair value, including:

estimates of gross yield, payment rates, expected credit loss rates, servicing costs, and discount rates on the credit card receivables that secure the non-recourse notes payable;

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Accrued interest expense on notes payable underlying our notes payable associated with structured financings, at fair value is recorded in Interest expense in our consolidated statements of income.

For material Level 3 liabilities carried at fair value measured on a recurring basis using significant unobservable inputs, the following table presents (in thousands) quantitative information about the valuation techniques and the inputs used in the fair value measurement at 

December 31, 2020 :

Quantitative Information about Level 3 Fair Value Measurement

Fair Value Measurement

Fair Value at December 31, 2020 (in thousands)  

Valuation Technique

Unobservable Input

Weighted Average

Notes payable associated with structured financings, at fair value

$ 2,919  

Discounted cash flows

Gross yield, net of finance charge charge-offs

Expected principal credit loss rate

Discount rate

Other Relevant Data

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As of December 31, 2022

Loans, Interest and Fees Receivable at Fair Value  

Loans, Interest and Fees Receivable Pledged as Collateral under Structured Financings at Fair Value  

Loans, Interest and Fees Receivable at Fair Value

Loans, Interest and Fees Receivable Pledged as Collateral under Structured Financings at Fair Value

Aggregate unpaid gross balance of loans, interest and fees receivable that are reported at fair value

$ 1,249  

$ 1,234,039  

Aggregate unpaid principal balance included within loans, interest and fees receivable that are reported at fair value

$ 1,204  

$ 1,131,895  

Aggregate fair value of loans, interest and fees receivable that are reported at fair value

$ 1,215  

$ 1,025,209  

Aggregate fair value of receivables carried at fair value that are 90 days or more past due (which also coincides with finance charge and fee non-accrual policies)

$ 4,640  

Unpaid principal balance of receivables within loans, interest and fees receivable that are reported at fair value and are 90 days or more past due (which also coincides with finance charge and fee non-accrual policies) over the fair value of such loans, interest and fees receivable

$ 59,656  

As of December 31, 2021

Loans, Interest and Fees Receivable at Fair Value  

Loans, Interest and Fees Receivable Pledged as Collateral under Structured Financings at Fair Value  

Loans, Interest and Fees Receivable at Fair Value

Loans, Interest and Fees Receivable Pledged as Collateral under Structured Financings at Fair Value

Aggregate unpaid gross balance of loans, interest and fees receivable that are reported at fair value

$ 515,434  

Aggregate unpaid principal balance included within loans, interest and fees receivable that are reported at fair value

$ 487,779  

Aggregate fair value of loans, interest and fees receivable that are reported at fair value

$ 416,558  

Aggregate fair value of receivables carried at fair value that are 90 days or more past due (which also coincides with finance charge and fee non-accrual policies)

$ 1,847  

$ 12,972  

Notes Payable

Notes Payable Associated with Structured Financings, at Fair Value as of December 31, 2020

Aggregate unpaid principal balance of notes payable

$ 101,314  

Aggregate fair value of notes payable

$ 2,919  

Details (in thousands) of our property on our consolidated balance sheets are as follows: 

As of December 31,

$ 1,695  

$ 4,122  

Furniture and fixtures

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Leasehold improvements

10,539  

10,570  

23,375  

30,124  

Less accumulated depreciation

( 16,040 )  

Property, net

$ 7,335  

$ 2,240  

Depreciation expense totaled $ 1.5  million and $ 1.2  million for the years ended December 31, 2021  and 2020 , respectively.

Depreciation expense totaled $ 2.2 million and $ 1.5  million for the years ended December 31, 2022  and 2021 , respectively.

Variable Interest Entities

The Company contributes the vast majority of receivables to VIEs.

These entities are sometimes established to facilitate third party financing.

When assets are contributed to a VIE, they serve as collateral for the debt securities issued by that VIE.

The evaluation of whether the entity qualifies as a VIE is based upon the sufficiency of the equity at risk in the legal entity.

This evaluation is generally a function of the level of excess collateral in the legal entity.

We consolidate VIEs when we hold a variable interest and we retain significant exposure to certain receivables and therefore, are the primary beneficiary.

Through our role as servicer, we are the primary beneficiary when we have the power to direct activities that most significantly affect the economic performance and have the obligation to absorb the majority of the losses or benefits.

In all of our VIEs, we continue to service the receivables (in accordance with defined servicing procedures), and as such, have the ability to significantly impact the economic performance of those VIEs.

In certain circumstances we guarantee the performance of the underlying debt or agree to contribute additional collateral when necessary.

When collateral is pledged, it is not available for the general use of the Company and can only be used to satisfy the related debt obligation.

The results of operations and financial position of consolidated VIEs are included in our consolidated financial statements.

The following table presents a summary of VIEs in which we had continuing involvement and held a variable interest (in millions):

December 31, 2022

December 31, 2021

Unrestricted cash and cash equivalents

Restricted cash and cash equivalents

Loans, interest and fees receivable, at fair value

Loans, interest and fees receivable, gross

Allowances for uncollectible loans, interest and fees receivable

Deferred revenue

Total Assets held by VIEs

Notes Payable, net held by VIEs

Maximum exposure to loss due to involvement with VIEs

We have operating leases primarily associated with our corporate offices and regional service centers as well as for certain equipment.

Our leases have remaining lease terms of 1 to 6  years, some of which include options, at our discretion, to extend the leases for additional periods generally on one -year revolving periods.

Our leases have remaining lease terms of 1 to 12 years, some of which include options, at our discretion, to extend the leases for additional periods generally on one -year revolving periods.

Other leases allow for us to terminate the lease based on appropriate notification periods.

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Operating lease cost, gross

$ 6,905  

$ 6,879  

Sublease income

( 5,234 )  

Net Operating lease cost

$ 1,671  

$ 1,746  

Cash paid under operating leases, gross

$ 10,470  

$ 10,278  

Weighted average remaining lease term - months

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Net Lease Payment

$ 4,767  

$ ( 3,112 )  

$ 1,655  

Total lease payments

( 3,112 )  

Less imputed interest

( 970 )  

$ 4,842  

In August 2021, we entered into an operating lease agreement for our corporate headquarters in Atlanta, Georgia with an unaffiliated third party.

The new lease covers approximately 73,000 square feet and commenced in June 2022 for a 146 month term.

The total commitment under the new lease is approximately $ 27.8 million and is included in the table above.

In connection with the commencement of this new lease, we discontinued most of the subleasing arrangements with third parties for space at our corporate headquarters.

A right-of-use asset and liability was recorded at the commencement date of the lease.

In addition, we occasionally lease certain equipment under cancelable and non-cancelable leases, which are accounted for as capital leases in our consolidated financial statements.

As of December 31, 2022, we had no material non-cancelable capital leases with initial or remaining terms of more than one year.

In August 2021, we entered into an operating lease agreement for our corporate headquarters in Atlanta, Georgia with an unaffiliated third party.

The new lease covers approximately 73,000 square feet and commences in June 2022 for a 146 month term.

The total commitment under the new lease is approximately $ 27.8 million and is not included in the table above.

A right-of-use asset and liability will be recorded at the commencement date of the lease.

Variable Interest Entities

The Company contributes certain receivables to VIEs.

These entities are sometimes established to facilitate third party financing.

When assets are contributed to the VIE, they serve as collateral for the debt securities issued by the VIE.

The evaluation of whether the entity qualifies as a VIE is based upon the sufficiency of the equity at risk in the legal entity.

This evaluation is generally a function of the level of excess collateral in the legal entity.

We consolidate VIEs when we hold a variable interest and are the primary beneficiary.

We are the primary beneficiary when we have the power to direct activities that most significantly affect the economic performance and have the obligation to absorb the majority of the losses or benefits.

In certain circumstances we guarantee the performance of the underlying debt or agree to contribute additional collateral when necessary.

When collateral is pledged it is not available for the general use of the Company and can only be used to satisfy the related debt obligation.

The results of operations and financial position of consolidated VIEs are included in our consolidated financial statements.

The following table presents a summary of VIEs in which we had continuing involvement or held a variable interest (in millions):

December 31, 2021

December 31, 2020

Unrestricted cash and cash equivalents

$ 209.5  

$ 96.6  

Restricted cash and cash equivalents

Loans, interest and fees receivable, at fair value

Loans, interest and fees receivable, gross

Allowances for uncollectible loans, interest and fees receivable

( 55.1 )  

Deferred revenue

( 8.2 )  

Total Assets held by VIEs

$ 1,517.2  

$ 970.0  

Notes Payable, net held by VIEs

$ 1,223.4  

$ 827.1  

Notes Payable, at fair value held by VIEs

Maximum exposure to loss due to involvement with VIEs

$ 1,289.1  

$ 864.4  

Notes Payable

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Revolving credit facility, not to exceed $ 50.0 million (expiring October 30, 2024 ) (2) (3) (4) (5)

Revolving credit facility, not to exceed $ 70.0 million (repaid in May 2021 ) (2) (3) (4) (5) (6)

Revolving credit facility, not to exceed $ 100.0 million (expiring October 15, 2022 ) (2) (3) (4) (5) (6)

Revolving credit facility, not to exceed $ 20.0 million (expiring July 15, 2023 ) (2) (3) (4) (5)

Revolving credit facility, not to exceed $ 100.0 million (expiring August 15, 2022 ) (2) (3) (4) (5) (6)

Revolving credit facility, not to exceed $ 200.0 million (repaid in June 2021 ) (3) (4) (5) (6)

Revolving credit facility, not to exceed $ 100.0 million (expiring March 15, 2024 ) (2) (3) (4) (5) (6)

Revolving credit facility, not to exceed $ 200.0 million (expiring May 15, 2024 ) (3) (4) (5) (6)

2 unchanged sentences

Revolving credit facility, not to exceed $ 250.0 million (expiring October 15, 2025 ) (3) (4) (5) (6)

Revolving credit facility, not to exceed $ 15.0 million (expiring February 15, 2024 ) (3) (4) (5)

Revolving credit facility, not to exceed $ 25.0 million (expiring June 16, 2025 ) (3) (4) (5)

Revolving credit facility, not to exceed $ 300.0 million (expiring December 15, 2026 ) (3) (4) (5) (6)

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Revolving credit facility, not to exceed $ 300.0 million (expiring May 15, 2026 ) (3) (4) (5) (6)

Revolving credit facility, not to exceed $ 250.0 million (expiring May 15, 2030 ) (3) (4) (5) (6)

Revolving credit facility, not to exceed $ 100.0 million (expiring August 5, 2024 ) (3) (4) (5) (6)

Revolving credit facility, not to exceed $ 100.0 million (expiring March 15, 2028 ) (3) (4) (5) (6)

Other facilities

Unsecured term debt (expiring August 26, 2024 ) with a weighted average interest rate equal to 8.0 % (3)

Amortizing debt facility (repaid in September 2021 ) (2) (3) (4) (5)

Total notes payable before unamortized debt issuance costs and discounts

1,666.9  

1,289.0  

Unamortized debt issuance costs and discounts

7 unchanged sentences

Loans are subject to certain affirmative covenants tied to default rates and other performance metrics the failure of which could result in required early repayment of the remaining unamortized balances of the notes.

Loans are associated with variable interest entities.

Loans are associated with VIEs.

See Note 8, "Variable Interest Entities" for more information.

Creditors do not have recourse against the general assets of the Company but only to the collateral within the VIEs.

* As of December 31, 2021 , the LIBOR rate was 0.10 % and the prime rate was 3.25 %.

October 2015, we (through a wholly owned subsidiary) entered a revolving credit facility with a (as subsequently amended) $ 50.0 million revolving borrowing limit that can be drawn to the extent of outstanding eligible principal receivables (of which $ 48.7 million was drawn as of December 31, 2021 ).

This facility is secured by the loans, interest and fees receivable and related restricted cash and accrues interest at an annual rate equal to LIBOR plus 3.0 %.

As of December 31, 2022 , the LIBOR rate was 4.39 %, the Prime Rate was 7.50 % and the SOFR Rate was 4.30 %.

In October 2015, we (through a wholly owned subsidiary) entered a revolving credit facility with a (as subsequently amended) $ 50.0 million revolving borrowing limit that can be drawn to the extent of outstanding eligible principal receivables (of which $ 50.0 million was drawn as of December 31, 2022).

This facility is secured by the loans, interest and fees receivable and related restricted cash and accrues interest at an annual rate equal to Secured Overnight Financing Rate ("SOFR") plus 3.0 %.

The facility matures on October 30, 2024 

and is subject to certain affirmative covenants, including a liquidity test and an eligibility test, the failure of which could result in required early repayment of all or a portion of the outstanding balance.

The facility is guaranteed by Atlanticus, which is required to maintain certain minimum liquidity levels.

October 2016, we (through a wholly owned subsidiary) entered a revolving credit facility available to the extent of outstanding eligible principal receivables of our CAR subsidiary (of which $ 32.1  million was drawn as of December 31, 2021 ).

The facility is guaranteed by Atlanticus, which is required to maintain certain minimum liquidity levels.

This facility is secured by the financial and operating assets of CAR and accrues interest at an annual rate equal to LIBOR plus a range between 2.4 % and 3.0 % based on certain ratios.

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In periods subsequent to October 2016, we amended the original agreement to either extend the maturity date and/or expand the capacity of this revolving credit facility.

As of December 31, 2021 , the borrowing limit was $ 55.0 million and the maturity is November 1, 2023.

As of December 31, 2022, the facility's borrowing limit was $ 55.0 million and the facility matures on November 1, 2024.

There were no other material changes to the existing terms or conditions as a result of these amendments and the new maturity date and borrowing limit are reflected in the table above.

In February 2017, we (through a wholly owned subsidiary) established a program under which we sell certain receivables to a consolidated trust in exchange for notes issued by the trust.

The notes were secured by the receivables and other assets of the trust.

Simultaneously with the establishment of the program, the trust issued a series of variable funding notes and sold an aggregate amount of up to $ 90.0 million (subsequently reduced to $ 70.0 million) of such notes to an unaffiliated third party.

The facility was repaid in May 2021.

In connection with the repayment, we removed an accrual of $ 1.5 million associated with a contingent liability incurred with the issuance of the notes.

Removal of the contingent liability was recorded as a component of Other non-operating revenue on our consolidated statements of income.

In 2018, we (through a wholly owned subsidiary) entered into two separate facilities associated with the above mentioned program to sell up to an aggregate $ 200.0 million of notes which are secured by the receivables and other assets of the trust (of which $ 0.0 million was outstanding as of December 31, 2021) to separate unaffiliated third parties pursuant to facilities that can be drawn upon to the extent of outstanding eligible receivables.

Interest rates on the notes are based on commercial paper rates plus 3.15 % and LIBOR plus a range between 4.5 % and 6.5 %, respectively.

The facilities mature on October 15, 2022 and August 15, 2022,

respectively, and are subject to certain affirmative covenants and collateral performance tests, the failure of which could result in required early repayment of all or a portion of the outstanding balance of notes.

In January 2023, the note was amended to change the underlying reference rate from LIBOR to SOFR, the facility size was increased to $ 65.0 million and the maturity date was extended to November 1, 2025. 

All other terms remained materially consistent with the amended facility.  

In 2018, we (through a wholly owned subsidiary) entered into a revolving credit facility to sell up to an aggregate $ 100.0 million of notes that are secured by the receivables and other assets of the trust (of which $ 0.0 million was outstanding as of December 31, 2022) that can be drawn upon to the extent of outstanding eligible receivables.

The interest rate on the notes equals the SOFR plus 3.1 %.

The facility matures on March 15, 2024, and is subject to certain affirmative covenants and collateral performance tests, the failure of which could result in required early repayment of all or a portion of the outstanding balance of notes.

As of December 31, 2022, the aggregate borrowing limit was $ 100.0 million.

In December 2017, we (through a wholly owned subsidiary) entered a revolving credit facility with a (as subsequently amended) $ 25.0 million revolving borrowing limit that is available to the extent of outstanding eligible principal receivables (of which $ 24.6 million was drawn as of December 31, 2022).

This facility is secured by the loans, interest and fees receivable and related restricted cash and accrues interest at an annual rate equal to LIBOR plus 3.5 %.

This facility is secured by the loans, interest and fees receivable and related restricted cash and accrues interest at an annual rate equal to SOFR plus 3.6 %.

The facility matures on April 21, 2023 and is subject to certain affirmative covenants, including payment, delinquency and charge-off tests, the failure of which could result in required early repayment of all or a portion of the outstanding balance.

The note is guaranteed by Atlanticus.

In June 2019, we (through a wholly owned subsidiary) entered a revolving credit facility with a $ 15.0 million revolving borrowing limit that is available to the extent of outstanding eligible principal receivables (of which $ 5.7  million was drawn as of December 31, 2021).

In June 2019, we (through a wholly owned subsidiary) entered a revolving credit facility with a (as subsequently amended) $ 20.0 million revolving borrowing limit that is available to the extent of outstanding eligible principal receivables (of which $ 11.1 million was drawn as of December 31, 2022).

This facility is secured by the loans, interest and fees receivable and related restricted cash and accrues interest at an annual rate equal to the Prime Rate.

The note is guaranteed by Atlanticus.

In June 2019, we sold $ 200.0 million of ABS secured by certain credit card receivables (expiring December 15, 2022).

The facility was repaid in June 2021.

In August 2019, we issued a $ 17.4 million term note, which bears interest at a fixed rate of 8.0 % and is due in August 2024. 

In September 2019, we (through a wholly owned subsidiary) entered a term facility with a $ 30.0 million revolving borrowing limit.

The facility was repaid in September 2021.

In August 2019, we issued a $ 17.4 million term note, which bears interest at a fixed rate of 8.0 % and is due in August 2024.

In November 2019, we sold $ 200.0 million of ABS secured by certain credit card receivables (expiring May 15, 2024).

1 unchanged sentence

The terms of the ABS allow for a three -year revolving structure with a subsequent 12 -month to 18 -month amortization period.

The weighted average interest rate on the securities is fixed at 4.91 %.

This facility is currently in contractual scheduled amortization.

In July 2020, we sold $ 100.0 million of ABS secured by certain private label credit receivables.

3 unchanged sentences

In October 2020, we sold $ 250.0 million of ABS secured by certain private label credit receivables.

A portion of the proceeds from the sale were used to pay-down our existing term ABS associated with our private label credit receivables, noted above, and the remaining proceeds have been invested in the acquisition of receivables.

A portion of the proceeds from the sale was used to pay down our existing term ABS associated with our private label credit receivables, noted above, and the remaining proceeds were used to fund the acquisition of receivables.

The terms of the ABS allow for a 41 -month revolving structure with an 18 -month amortization period, and the securities mature between August 2025 and October 2025.

The weighted average interest rate on the securities is fixed at 4.1 %.

In January 2021, we (through a wholly owned subsidiary) entered a revolving credit facility with a $ 15.0 million borrowing limit (of which $ 10.0 million was drawn as of December 31, 2021) that is available to the extent of outstanding eligible principal receivables.

In January 2021, we (through a wholly owned subsidiary) entered a revolving credit facility with a (as subsequently amended) $ 25.0 million borrowing limit (of which $ 25.0 million was drawn as of December 31, 2022) that is available to the extent of outstanding eligible principal receivables.

This facility is secured by the loans, interest and fees receivable and related restricted cash and accrues interest at an annual rate equal to the greater of the Prime Rate or 4 %.

The facility matures on February 15, 2024 and is subject to certain affirmative covenants, including a liquidity test and an eligibility test, the failure of which could result in required early repayment of all or a portion of the outstanding balance.

The facility matures on June 16, 2025 and is subject to certain affirmative covenants, including a liquidity test and an eligibility test, the failure of which could result in required early repayment of all or a portion of the outstanding balance.

The note is guaranteed by Atlanticus, which is required to maintain certain minimum liquidity levels.

In June 2021, we sold $ 300.0 million of ABS secured by certain credit card receivables (expiring May 15, 2026 through December 15, 2026).

June 2021, we sold $ 300.0 million of ABS secured by certain credit card receivables (expiring May 15, 2026 through December 15, 2026).

The terms of the ABS allow for a four -year revolving structure with a subsequent 11 -month to 18 -month amortization period.

The weighted average interest rate on the securities is fixed at 4.24 %.

In September 2021, we entered a term facility with a $ 75 million limit (of which $ 0 was drawn as of December 31, 2021) that is available to the extent of outstanding eligible principal receivables.

This facility is secured by the loans, interest and fees receivable and related restricted cash and accrues interest at an annual rate equal to 2.75 %.

The terms of the facility allow for a 24 month revolving structure with an 18 -month amortization period and the facility matures in March 2025.

In September 2021, we entered a term facility with a $ 75.0 million limit (of which $ 0.0 million was outstanding of December 31, 2022) that is available to the extent of outstanding eligible principal receivables.

This facility is secured by the loans, interest and fees receivable and related restricted cash and accrues interest at an annual rate equal to LIBOR plus 2.75 %.

The terms of the facility allow for a 24 -month revolving structure with an 18 -month amortization period and the facility matures in March 2025. 

In November 2021, we sold $ 300.0 million of ABS secured by certain credit card receivables (expiring May 15, 2026).

1 unchanged sentence

The weighted average interest rate on the securities is fixed at 3.53 %.

As of December 31, 2021 , we were in compliance with the covenants underlying our various notes payable.

Notes Payable Associated with Structured Financings, at Fair Value

Scheduled (in millions) in the table below are ( 1 ) the carrying amount of our structured financing note secured by certain credit card receivables and reported at fair value as of 

December 31, 2020 , ( 2 ) the outstanding face amount of our structured financing note secured by certain credit card receivables and reported at fair value as of 

December 31, 2020 , and ( 3 ) the carrying amount of the credit card receivables and restricted cash that provide the exclusive means of repayment for the note (i.e., lenders have recourse only to the specific credit card receivables and restricted cash underlying each respective facility and cannot look to our general credit for repayment) as of 

December 31, 2020 . The facility was repaid in December 2021.

Carrying Amounts at Fair Value as of

December 31, 2020

Securitization facility (repaid in December 2021 ), outstanding face amount of $ 101.3 million as of December 31, 2020 bearing interest at a weighted average 5.7 % interest rate, based upon LIBOR which was secured by credit card receivables and restricted cash aggregating $ 2.9 million as of December 31, 2020 in carrying amount

In May 2022, we entered a $ 250.0 million ABS agreement (of which $ 250.0 million was drawn as of December 31, 2022) secured by certain credit card receivables (expiring May 15, 2030).

The terms of the ABS allow for a five -year revolving structure with a subsequent 18 -month amortization period.

The weighted average interest rate on the securities is fixed at 6.33 %.

In August 2022, we entered a $ 100.0 million ABS agreement secured by certain credit card receivables (of which $ 0.0 million was outstanding as of December 31, 2022) that can be drawn upon to the extent of outstanding eligible receivables.

The interest rate on the notes is based on the Term Secured Overnight Financing Rate ("Term SOFR") plus 1.8 %.

The facility matures on August 5, 2024.

In September 2022, we sold $ 100.0 million of ABS secured by certain private label credit receivables.

A portion of the proceeds from the sale was used to pay down other revolving facilities associated with our private label credit receivables, noted above, and the remaining proceeds have been invested in the acquisition of receivables.

The terms of the ABS allow for a 3 -year revolving structure with an 18 -month amortization period.

The weighted average interest rate on the securities is fixed at 7.3 %.

As of December 31, 2022, we were in compliance with the covenants underlying our various notes payable and credit facilities.

Senior Notes, net

In November 2021, we issued $ 150.0 million aggregate principal amount of senior notes (included on our consolidated balance sheet as "Senior notes, net").

November 2021, we issued $ 150.0 million aggregate principal amount of senior notes (included on our consolidated balance sheet as "Senior notes, net").

The senior notes are general unsecured obligations of the Company and rank equally in right of payment with all of the Company’s existing and future senior unsecured and unsubordinated indebtedness, and will rank senior in right of payment to the Company’s future subordinated indebtedness, if any.

2 unchanged sentences

Interest on the senior notes is payable quarterly in arrears on February 1, May 1, August 1 and November 1 of each year.

The senior notes will mature on November 30, 2026. 

We are amortizing fees associated with the issuance of the senior notes into interest expense over the expected life of the notes.

Amortization of these fees for the year ended 

December 31, 2021 

totaled $ 0.1  million. 

Convertible Senior Notes

In November 2005, we issued $ 300.0 million aggregate principal amount of convertible senior notes.

These notes (net of repurchases since the issuance date) are reflected within convertible senior notes on our consolidated balance sheets.

In the year ended December 31, 2021, we repurchased $ 22.1 million in face amount of our outstanding convertible senior notes for $ 30.4 million in cash (including accrued interest).

The repurchase resulted in a loss of approximately $ 14.1 million (including the convertible senior notes’

applicable share of deferred costs, which were written off in connection with the repurchase).

Upon acquisition, the notes were retired.

In June 2021, we provided notice of redemption of all outstanding convertible senior notes.

Upon the redemption notice, holders were allowed to convert the convertible senior notes in lieu of the redemption consideration.

At the expiration of the conversion option, holders with $ 11.8 million in principal amount of the convertible senior notes had elected to convert.

Upon final determination of the conversion consideration amount, we delivered to holders of the converting notes, cash of $1,000 per $ 1,000 aggregate principal amount of notes and $ 12.1 million of cash in respect of the remainder of the conversion obligation.

The redemption

resulted in a loss of approximately $ 15.3 million (including the convertible senior notes’

applicable share of deferred costs, which were written off in connection with the repurchase).

Upon redemption, the notes were retired.

The following summarizes (in thousands) components of our consolidated balance sheets associated with our convertible senior notes:

December 31, 2020

Face amount of convertible senior notes

$ 33,839  

Net carrying value

$ 24,386  

Carrying amount of equity component included in paid-in capital

$ 108,714  

Excess of instruments’

if-converted values over face principal amounts

In conjunction with the offering of the convertible senior notes, we lent Bear, Stearns International Limited (“BSIL”) and Bear, Stearns & Co.

Inc, as agent for BSIL ("collectively "Bear Stearns"), 5,677,950 shares of our common stock.

The obligations of Bear Stearns were assumed by JP Morgan in 2008 who returned the remaining loaned shares to us upon redemption of the notes. The loaned shares were retired in December 2021.

Amortization of these fees for the years ended December 31, 2022 and 2021 totaled $ 1.4 million and $ 0.1 million, respectively.

Commitments and Contingencies

Under finance products available in the private label credit and general purpose credit card channels, consumers have the ability to borrow up to the maximum credit limit assigned to each individual’s account.

Unfunded commitments under these products aggregated $ 2.0  billion at December 31, 2021.

Under finance products available in the private label credit and general purpose credit card channels, consumers have the ability to borrow up to the maximum credit limit assigned to each individual’s account.

Unfunded commitments under these products aggregated $ 2.2 billion at December 31, 2022.

We have never experienced a situation in which all borrowers have exercised their entire available lines of credit at any given point in time, nor do we anticipate this will ever occur in the future.

3 unchanged sentences

These loans are secured by the underlying auto inventory and, in certain cases where we have other lending products outstanding with the dealer, are secured by the collateral under those lending arrangements as well, including any outstanding dealer reserves.

As of December 31, 2021, CAR had unfunded outstanding floor-plan financing commitments totaling $ 12.6  million.

As of December 31, 2022, CAR had unfunded outstanding floor-plan financing commitments totaling $ 11.4 million.

Each draw against unused commitments is reviewed for conformity to pre-established guidelines.

3 unchanged sentences

We would accrue liabilities related to these contingencies in any future period if and in which we assess the likelihood of an estimable payment as probable.

Under the account terms, consumers have the option of enrolling in a credit protection program with our lending partner which would make the minimum payments owed on their accounts for a period of up to six months upon the occurrence of an eligible event.

Under the account terms, consumers have the option of enrolling in a credit protection program with our issuing bank partner which would make the minimum payments owed on their accounts for a period of up to six months upon the occurrence of an eligible event.

Eligible events typically include loss of life, job loss, disability, or hospitalization.

As an acquirer of receivables, our potential exposure under this program, if all eligible participants applied for this benefit, was $ 53.3 million as of December 31, 2021 ( of which we have accrued $ 0.6 million as of December 31, 2021 based on current claims).

As an acquirer of receivables, our potential exposure under this program, if all eligible participants applied for this benefit, was $ 69.4  million as of December 31, 2022.

We have never experienced a situation in which all eligible participants have applied for this benefit at any given point in time, nor do we anticipate this will ever occur in the future.

We include our estimate of future claims under this program within our fair value analysis of the associated receivables.

We also are subject to certain minimum payments under cancelable and non-cancelable lease arrangements.

1 unchanged sentence

We are involved in various legal proceedings that are incidental to the conduct of our business.

There are currently no pending legal proceedings that are expected to be material to us.

Included in the first quarter of 2022 is an $ 8.5 million expense related to a settlement of outstanding litigation associated with our Auto Finance segment. 

Deferred tax assets and liabilities reflect the effects of tax losses, credits, and the future income tax effects of temporary differences between the consolidated financial statement carrying amounts of existing assets and liabilities and their respective tax bases and are measured using enacted tax rates that apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

The current and deferred portions (in thousands) of federal, foreign and state income tax benefit or expense are as follows:

The current and deferred portions (in thousands) of our federal, foreign, and state and other income tax expenses or benefits are as follows:

For the Year Ended December 31,

Federal income tax (expense) benefit:

Current tax (expense) benefit

$ ( 34,910 )  

$ 1,351  

Current tax benefit (expense)

Deferred tax (expense)

( 2,369 )  

Total federal income tax (expense)

$ ( 37,279 )  

Foreign income tax (expense) benefit:

Current tax (expense)

$ ( 107 )  

Deferred tax benefit (expense)

Total foreign income tax (expense)

$ ( 106 )  

State and other income tax benefit (expense):

Current tax (expense)

$ ( 4,910 )  

Deferred tax benefit

Current tax benefit (expense)

Deferred tax (expense) benefit

Total state and other income tax (expense) benefit

$ ( 4,399 )  

Total income tax (expense)

$ ( 41,784 )  

The $ 34.9  million of 2021 current federal income tax expense in the above table is net of $ 13.8 million of tax benefits related to federal net operating loss and capital loss carry forwards.

Similarly, the $ 4.9 million of 2021 current state and other income tax expense above is net of $ 0.8 million of tax benefits related to state net operating loss carry forwards.

We experienced an effective income tax expense rate of 9.8 % and 19.0 % for the years ended December 31, 2022, and December 31, 2021, respectively.

Our effective income tax expense rate for the year ended December 31, 2021, was below the statutory rate principally due to ( 1 ) our deduction for income tax purposes of amounts characterized in our consolidated financial statements as dividends on a preferred stock issuance, such amounts constituting deductible interest expense on a debt issuance for tax purposes and ( 2 ) deductions associated with the exercise of stock options and the vesting of restricted stock at times when the fair value of our stock exceeded such share-based awards’

grant date. Offsetting the above factors are the effects on our effective tax rate of state and foreign income tax expense and executive compensation deduction limitations under Section 162 (m) of the Internal Revenue Code of 1986.

Our effective income tax expense rate for the year ended December 31, 2020, was below the statutory rate principally due to ( 1 ) our deduction for income tax purposes of amounts characterized in our consolidated financial statements as dividends on a preferred stock issuance, such amounts constituting deductible interest expense on a debt issuance for tax purposes and ( 2 ) the reversal in 2020 of our prior year accruals of interest and penalties on liabilities for unpaid taxes, such reversal arising from the complete abatement by the IRS of failure-to-pay penalties (and accrued interest thereon) related to a now-completed audit by the IRS of our 2008 tax returns.

We report income tax-related interest and penalties (including those associated with both our accrued liabilities for uncertain tax positions and unpaid tax liabilities) within our income tax line item on our consolidated statements of income. We likewise report the reversal of income tax-related interest and penalties within such line item to the extent we resolve our liabilities for uncertain tax positions or unpaid tax liabilities in a manner favorable to our accruals therefor. For 2021, we experienced only de minimis interest expense and reversals, and for 2020, we reported a net reversal of income tax-related interest and penalties of $ 1.0 million within our income tax line item.

The following table reconciles our effective income tax expense or benefit rates for 2021 and 2020 :

Our effective income tax expense rates for these years are below the statutory rate principally due to ( 1 ) deductions associated with the exercise of stock options and the vesting of restricted stock at times when the fair value of our stock exceeded such share-based awards’

grant date values—such deductions being significantly higher in 2022 than in 2021 given stock option exercises in 2022 by the Executive Chairman of our Board of Directors, such options being grandfathered from executive compensation deduction limitations under Section 162 (m) of the Internal Revenue Code of 1986, as amended (the “Code”) and ( 2 ) our deduction for income tax purposes of amounts characterized in our consolidated financial statements as dividends on a preferred stock issuance, such amounts constituting deductible interest expense on a debt issuance for tax purposes. Offsetting the above factors are the effects on our effective tax rate of state and foreign income tax expense, taxes on global intangible low-taxed income, and executive compensation deduction limitations under Section 162 (m) of the Code.

Further details related to the above are reflected in the table below reconciling our effective income tax expense rate to the statutory rate.

For 2022 and 2021, we experienced only de minimis interest expense and reversals within our income tax line item.

The following table reconciles our effective income tax expense rate to the statutory rate for 2022 and 2021:

For the Year Ended December 31,

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(Decrease) increase in statutory federal tax expense rate resulting from:

Share-based compensation, net of executive compensation deduction limitations

( 1.4 )  

Global intangible low-taxed income tax

Net interest and penalties related to uncertain tax positions and unpaid tax liabilities (including reversals thereof from IRS settlement in 2020)

Share-based compensation

Section 162(m) of the Code executive compensation deduction limitations

Net interest and penalties related to uncertain tax positions and unpaid tax liabilities

Interest expense on preferred stock classified as debt for tax purposes

( 1.6 )  

Foreign taxes, net of valuation allowance effects

( 0.1 )  

State taxes, net of valuation allowance effects

Prior year provision to return reconciling items, tax effects of non-controlling interests, and other

( 0.6 )  

Global intangible low-taxed income tax

Effective tax expense rate

As of December 31, 2021 and December 31, 2020 , the respective significant components (in thousands) of our deferred tax assets and liabilities (which are included as a component of our Income tax liability on our consolidated balance sheets) were:

As of December 31, 2022, and December 31, 2021, the respective significant components (in thousands) of our deferred tax assets and liabilities (which are included as a component of our Income tax liability on our consolidated balance sheets) were:

As of December 31,

Deferred tax assets:

Software development costs/fixed assets

Provision for loan loss

14,647  

30,080  

Credit card fair value election differences

48,730  

Capitalized research and experimentation expenditures and fixed assets

Provision for credit loss

Credit card and other loans receivable fair value election differences

Equity-based compensation

2 unchanged sentences

Federal net operating loss and capital loss carry-forwards

11,279  

Federal tax credits and minimum tax credit carry-forward

Foreign net operating loss carry-forward

Interest expense on debt with equity treatment for tax purposes

State tax benefits, primarily from net operating losses

27,081  

36,052  

Deferred tax assets, gross

$ 92,543  

$ 80,125  

Valuation allowances

( 22,716 )  

Deferred tax assets, net of valuation allowances

$ 69,827  

$ 48,424  

Deferred tax (liabilities):

Prepaid expenses and other

$ ( 513 )  

Software development costs and fixed assets

( 41 )  

Equity in income of equity-method investee

( 697 )  

Market discount on acquired credit card and other loans receivable

( 94,958 )  

Market discount on acquired marked discount bonds

Deferred costs

( 590 )  

Convertible senior notes

Deferred tax (liabilities), gross

$ ( 96,799 )  

Deferred tax (liabilities), net

$ ( 26,972 )  

We undertook a detailed review of our deferred taxes and determined that a valuation allowance was required for certain deferred tax assets in state tax jurisdictions within the U.S.

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Because our valuation allowance evaluations require consideration of future events, significant judgment is required in making the evaluations, and our conclusions could be materially different if our expectations are not met.

Our valuation allowances totaled $ 22.7 million and $ 31.7 million as of December 31, 2021, and December 31, 2020, respectively;

a release of approximately $ 1.1 million of state valuation allowances accounted for part of the decline in valuation allowance balances between December 31, 2020, and December 31, 2021.

Our subsidiaries file federal, state and/or foreign income tax returns.

Our valuation allowances totaled $ 20.7 million and $ 22.7 million as of December 31, 2022, and December 31, 2021, respectively.

Certain of our deferred tax assets relate to federal, foreign, and state net operating losses, and we have no other net operating losses, capital losses, or credit carryforwards other than those noted herein.

We have recorded a federal deferred tax asset of $ 22.6 million (based on indefinite-lived federal net operating loss carryforwards of $ 104.0 million). 

We have recorded state deferred tax assets of $ 28.6 million based on state net operating loss carryforwards, some of which are indefinite-lived and some which expire in various years beginning in 2023.

Our subsidiaries file federal, foreign, and/or state and other income tax returns.

In the normal course of our business, we are subject to examination by taxing authorities throughout the world, including such major jurisdictions as the U.S., the U.K., and various U.S.

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With a few exceptions of a non-material nature, we are no longer subject to federal, state, local, or foreign income tax examinations for years prior to 2018.

Reconciliations (in thousands) of our unrecognized tax benefits from the beginning to the end of 2021 and 2020 , respectively, are as follows:

Reconciliations (in thousands) of our unrecognized tax benefits from the beginning to the end of 2022 and 2021, respectively, are as follows: 

Balance at January 1,

$ ( 577 )  

Reductions based on tax positions related to prior years

(Additions) reductions based on tax positions related to prior years

( 26 )  

(Additions) based on tax positions related to prior years

(Additions) based on tax positions related to the current year

( 107 )  

Interest and penalties accrued

( 31 )  

Balance at December 31,

$ ( 708 )  

Further, our unrecognized tax benefits that, if recognized, would affect the effective tax rate are not material at only $ 0.7  million and $ 0.6  million as of 

December 31, 2021 , and 2020 , respectively.

Our unrecognized tax benefits that, if recognized, would affect the effective tax rate are not material at only $ 0.9 million, $ 0.7 million and $ 0.6 million as of 

December 31, 2022, 2021 and 2020,  respectively.

Net Income Attributable to Controlling Interests Per Common Share

We compute net income attributable to controlling interests per common share by dividing net income attributable to controlling interests by the weighted-average number of shares of common stock (including participating securities) outstanding during the period, as discussed below.

We compute net income attributable to controlling interests per common share by dividing net income attributable to controlling interests by the weighted-average number of shares of common stock (including participating securities) outstanding during the period, as discussed below.

Diluted computations applicable in financial reporting periods in which we report income reflect the potential dilution to the basic income per share of common stock computations that could occur if securities or other contracts to issue common stock were exercised, were converted into common stock or were to result in the issuance of common stock that would share in our results of operations.

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Net income attributable to controlling interests

$ 177,902  

$ 94,120  

Preferred stock and preferred unit dividends and accretion

( 22,363 )  

Net income attributable to common shareholders—basic

155,539  

77,050  

Effect of dilutive preferred stock dividends and accretion

Net income attributable to common shareholders—diluted

$ 157,939  

$ 79,450  

Basic (including unvested share-based payment awards) (1)

15,074  

14,486  

Effect of dilutive stock compensation arrangements and exchange of preferred stock

Diluted (including unvested share-based payment awards) (1)

20,898  

20,102  

Net income attributable to common shareholders per share—basic

$ 10.32  

$ 5.32  

Net income attributable to common shareholders per share—diluted

$ 7.56  

$ 3.95  

Shares related to unvested share-based payment awards included in our basic and diluted share counts were 137,046 for the year ended  

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December 31, 2021 .

As their effects were anti-dilutive, we excluded stock options to purchase 0.0  million and 0.1  million shares from our net income attributable to controlling interests per share of common stock calculations for the years ended December 31, 2021 and 2020 , respectively. 

For the years ended December 31, 2021 and 2020 , we included 4,000,000 and 3,793,869  shares, respectively, in our outstanding diluted share counts associated with our Series A Preferred Stock.

See Note 4, "Shareholders' Equity and Preferred Stock", for a further discussion of these convertible securities. 

As their effects were anti-dilutive, we excluded stock options to purchase 0.1 million shares from our net income attributable to controlling interests per share of common stock calculations for the year ended December 31, 2022.  

No shares were excluded from our net income attributable to controlling interests per share of common stock calculations for the year ended December 31, 2021. 

We excluded stock options to purchase 0.1 million shares from our net income attributable to controlling interests per share of common stock calculations for the year ended December 31, 2020.

For the years ended December 31, 2022, 2021 and 2020, we included 4.0 million, 4.0 million and 3.8 million shares of common stock for each period in our outstanding diluted share counts associated with our Series A Preferred Stock.

See Note 5, "Redeemable Preferred Stock", for a further discussion of these convertible securities.

For the year ended December 31, 2021, we included 0.1 million shares of common stock in the diluted net income attributable to controlling interests per share of common stock calculations associated with our convertible senior notes.

Stock-Based Compensation

We currently have two stock-based compensation plans, the Second Amended and Restated Employee Stock Purchase Plan (the “ESPP”) and the Fourth Amended and Restated 2014 Equity Incentive Plan (the “Fourth Amended 2014 Plan”). Our Fourth Amended 

2014 Plan provides that we may grant options on or shares of our common stock (and other types of equity awards) to members of our Board of Directors, employees, consultants and advisors.

We currently have two stock-based compensation plans, the Second Amended and Restated Employee Stock Purchase Plan (the “ESPP”) and the Fourth Amended and Restated 2014 Equity Incentive Plan (the “Fourth Amended 2014 Plan”).

Our Fourth Amended 2014 Plan provides that we may grant options on or shares of our common stock (and other types of equity awards) to members of our Board of Directors, employees, consultants and advisors.

The Fourth Amended 2014 Plan was approved by our shareholders in May 2019.

Among other things, the Fourth Amended 2014 Plan (i) increased the number of shares of Common Stock available for issuance under the plan by 2,000,000 shares and (ii) extended the term of the plan by approximately two years.

As of December 31, 2021 , 54,321 shares remained available for issuance under the ESPP and 1,661,957 shares remained available for issuance under the Fourth Amended 2014 Plan.

As of December 31, 2022, 51,041  shares remained available for issuance under the ESPP and 2,085,158 shares remained available for issuance under the Fourth Amended 2014 Plan.

Exercises and vestings under our stock-based compensation plans resulted in no income tax-related charges to paid-in capital during the years ended December 31, 2022 and 2021.

Restricted Stock and Restricted Stock Units

During the years ended December 31, 2021 and 2020 , we granted 49,988 and 61,373 shares of restricted stock and restricted stock units (net of any forfeitures), respectively, with aggregate grant date fair values of $ 1.7  million and $ 0.6  million, respectively.

We incurred expenses of $ 1.2  million and $ 0.8  million during the years ended December 31, 2021 and 2020 , respectively, related to restricted stock awards.

When we grant restricted stock and restricted stock units, we defer the grant date value of the restricted stock and restricted stock unit and amortize that value (net of the value of anticipated forfeitures) as compensation expense with an offsetting entry to the paid-in capital component of our consolidated shareholders’

During the years ended December 31, 2022, 2021 and 2020, we granted 105,360 shares, 49,988 shares and 61,373 shares of restricted stock and restricted stock units (net of any forfeitures), respectively, with aggregate grant date fair values of $ 4.9 million, $ 1.7 million and $ 0.6 million, respectively.

We incurred expenses of $ 2.6 million, $ 1.2 million and $ 0.8 million during the years ended December 31, 2022, 2021 and 2020, respectively, related to restricted stock awards.

When we grant restricted stock and restricted stock units, we defer the grant date value of the restricted stock and restricted stock unit and amortize that value (net of the value of anticipated forfeitures) as compensation expense with an offsetting entry to the paid-in capital component of our consolidated shareholders’

Our restricted stock awards typically vest over a range of 12 to 60 months (or other term as specified in the grant which may include the achievement of performance measures) and are amortized to salaries and benefits expense ratably over applicable vesting periods.

As of December 31, 2022, our unamortized deferred compensation costs associated with non-vested restricted stock awards were $ 3.3  million with a weighted-average remaining amortization period of 2.8  years.

No forfeitures have been included in our compensation cost estimates based on historical forfeiture rates.

No forfeitures have been included in our compensation cost estimates based on historical forfeiture rates.

Stock Options

The exercise price per share of the options awarded under the Fourth Amended 2014 Plan must be equal to or greater than the market price on the date the option is granted.

The option period may not exceed 10 years from the date of grant. Options granted during 2021  were valued using the Black-Scholes-Merton option pricing model with the following assumptions:

a dividend yield of zero, years to maturity of 

5  years (which equals the expected term), volatility of 80.9 % (based on the average of daily historical volatility using the expected term), and a risk-free rate of 

0.86 % (based on 5 year US Treasury securities).

We had expense of $ 2.0  million and $ 0.5  million related to stock option-related compensation costs during the years ended December 31, 2021 and 2020 , respectively.

When applicable, we recognize stock option-related compensation expense for any awards with graded vesting on a straight-line basis over the vesting period for the entire award. The table below includes additional information about outstanding options:

The exercise price per share of the options awarded under the Fourth Amended 2014 Plan must be equal to or greater than the market price on the date the option is granted.

The option period may not exceed 10 years from the date of grant.

We had expense of $ 1.6 million, $ 2.0 million and $ 0.5 million related to stock option-related compensation costs during the years ended December 31, 2022, 2021 and 2020, respectively.

When applicable, we recognize stock option-related compensation expense for any awards with graded vesting on a straight-line basis over the vesting period for the entire award.

The table below includes additional information about outstanding options:

Number of Shares

7 unchanged sentences

$ 3.08  

( 526,015 )  

$ 3.58  

Expired/Forfeited

13 unchanged sentences

$ 24.00  

$ 9.47  

Cash received from options exercised, net

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Grant date fair value of shares vested

Options issued during the years ended December 31, 2021 and 2020  had an aggregate grant-date fair value of $ 3.1 million and $ 1.4 million, respectively. We had $ 2.4  million and $ 1.4  million of unamortized deferred compensation costs associated with non-vested stock options as of December 31, 2021 and December 31, 2020 , 

respectively, with a weighted average remaining amortization period of 1.6 years as of December 31, 2021. 

Upon exercise of outstanding options the Company issues new shares. 

$ 1,802  

Options issued during the years ended December 31, 2021 and 2020 had aggregate grant-date fair values of $ 3.1 million and $ 1.4 million, respectively.

No options were issued during the year ended December 31, 2022.

We had $ 0.8 million and $ 2.4 million of unamortized deferred compensation costs associated with non-vested stock options as of December 31, 2022 and December 31, 2021, respectively, with a weighted average remaining amortization period of 1.1 years as of December 31, 2022.

Upon exercise of outstanding options, the Company issues new shares.

On August 10, 2022, the Company entered into an At Market Issuance Sales Agreement (the “Sales Agreement”) providing for the sale by the Company of up to an aggregate offering price of $ 100,000,000 of our (i) Series B Preferred Stock and (ii) senior notes, from time to time through a sales agent, in connection with the ATM Program.

Sales pursuant to the Sales Agreement, if any, may be made in transactions that are deemed to be “at-the-market offerings”

as defined in Rule 415 under the Securities Act of 1933, as amended, including sales made directly on or through the NASDAQ Global Select Market.

The sales agent will make all sales using commercially reasonable efforts consistent with its normal trading and sales practices up to the amount specified in, and otherwise in accordance with the terms of, the placement notice.

For further information regarding the ATM Program, see Note 4, “Shareholders’

Equity and Preferred Stock.” 

Employee Benefit Plans

2 unchanged sentences

All full time U.S.

employees are eligible to participate in the 401 (k) plan. We made matching contributions of $ 274,759 and $ 197,214 in 

2021 and 2020 , respectively.

employees are eligible to participate in the 401 (k) plan. We made matching contributions of $ 341,245 , $ 274,759 and $ 197,214 for the years ended December 31, 

2021  and 2020, respectively.

Also, all employees, excluding executive officers, are eligible to participate in the ESPP.

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The price of stock purchased under the ESPP is approximately 85 % of the fair market value per share of our common stock on the purchase date.

Employees contributed $ 79,095 to purchase 2,241  shares of common stock in 2021  and $ 106,775 to purchase 9,209 shares of common stock in 2020  under the ESPP.

Employees contributed $ 107,995 to purchase 3,280 shares of common stock in 2022 , $ 79,095 to purchase 2,241 shares of common stock in 2021  and $ 106,775  to purchase 9,209 shares of common stock in 2020 under the ESPP.

The ESPP covers up to 100,000 shares of common stock.

Our charge to expense associated with the ESPP was $ 28,937 and $ 31,748 in 2021 and 2020 , respectively.

Our charge to expense associated with the ESPP was $ 35,348 , $ 28,937 and $ 31,748 in 2022 , 

2021 , and 2020  respectively.

Related Party Transactions

2 unchanged sentences

Hanna, Frank J.

Hanna, III and certain trusts that were Hanna affiliates, following our initial public offering ( 1 ) if one or more of the shareholders accepts a bona fide offer from a third party to purchase more than 50 % of the outstanding common stock, each of the other shareholders that is a party to the agreement may elect to sell his shares to the purchaser on the same terms and conditions, and ( 2 ) if shareholders that are a party to the agreement owning more than 50% of the common stock propose to transfer all of their shares to a third party,

then such transferring shareholders may require the other shareholders that are a party to the agreement to sell all of the shares owned by them to the proposed transferee on the same terms and conditions.

In June 2007, we entered into a sublease for 1,000 square feet (as later adjusted to 3,100 square feet) of excess office space at our Atlanta headquarters with HBR Capital, Ltd.

2 unchanged sentences

The sublease rate per square foot is the same as the rate that we pay under the prime lease.

Under the sublease, HBR paid us $ 17,299 and $ 16,960 for 2021  and 2020, respectively.

Under the sublease, HBR paid us $ 62,422 , $ 17,299 and $ 16,960 for 2022, 2021 and 2020, respectively.

The aggregate amount of payments required under the sublease from January 1, 2023 

2 unchanged sentences

HBR reimburses us for the full cost of the employees, based on the amount of time devoted to HBR.

In the years ended December 31, 2021  and 2020 , we received $ 380,733 and $ 334,526 , respectively, of reimbursed costs from HBR associated with these leased employees.

In the years ended December 31, 2022, 2021 and 2020, we received $ 404,302 , $ 380,733 and $ 334,526 , respectively, of reimbursed costs from HBR associated with these leased employees.

On November 26, 2014, we and certain of our subsidiaries entered into a Loan and Security Agreement with Dove.

The agreement provided for a senior secured term loan facility in an amount of up to $ 40.0 million at any time outstanding.

On December 27, 2019, the Company issued 400,000 shares (aggregate initial liquidation preference of $ 40 million) of its Series A Preferred Stock in exchange for full satisfaction of the $ 40.0 million that the Company owed Dove under the Loan and Security Agreement.

Dividends on the preferred stock are 6 % per annum (cumulative, non-compounding) and are payable in preference to any common stock dividends, in cash.

The Series A Preferred Stock is perpetual and has no maturity date.

The Company may, at its option, redeem the shares of Series A Preferred Stock on or after January 1, 2025 at a redemption price equal to $ 100 per share, plus any accumulated and unpaid dividends.

At the request of the holders of a majority of the shares of the Series A Preferred Stock, the Company shall offer to redeem all of the Series A Preferred Stock at a redemption price equal to $100 per share, plus any accumulated and unpaid dividends, at the option of the holders thereof, on or after January 1, 2024.

Upon the election by the holders of a majority of the shares of Series A Preferred Stock, each share of the Series A Preferred Stock is convertible into the number of shares of the Company’s common stock as is determined by dividing (i) the sum of (a) $100 and (b) any accumulated and unpaid dividends on such share by (ii) an initial conversion price equal to $ 10 per share, subject to certain adjustment in certain circumstances to prevent dilution.

Given the redemption rights contained within the Series A Preferred Stock, we account for the outstanding preferred stock as temporary equity in the consolidated balance sheets.

Dove is a limited liability company owned by three trusts.

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Hanna, III and members of his immediate family are the beneficiaries of these other two trusts.

See Note 5 "Redeemable Preferred Stock" for more information.

During 2022, the Company utilized Axiom Bank, NA to provide legal and other services related to various commercial opportunities. David G.

Hanna, Frank J.

Hanna, III and members of their immediate families, control and own Axiom Bancshares, Inc., which is the bank holding company for Axiom Bank, NA.

The aggregate amount of payments made to Axiom Bank during 2022 was $ 1.0 million.

Subsequent Events

and ( 2 ) nonrecognized, or those that provide evidence with respect to conditions that did not exist at the date of the balance sheet but arose subsequent to that date. 

We have evaluated subsequent events occurring after December 31, 2022 , and based on our evaluation we did not identify any recognized or nonrecognized subsequent events that would have required further adjustments to our consolidated financial statements other than the developments described below.

We purchased 16,313 shares of common stock through February 28, 2023, which were subsequently retired.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures